Property Guarantor

Reporter: Graeme Butler

It's a sign that's getting harder and harder for first home buyers to see - and for their parents it's just as agonizing watching the great Australian dream slip away - but there are ways to help jump the queue and get into the market.

Smart Money - helping your kids.

Going Guarantor

Jim and Heather Anderson have joined a growing number of Perth parents by becoming guarantors for their children's home loans as a way of getting them into the market - Andrew says "we wanted to go in and do everything by ourselves you know because it's a pretty big thing it's nice to be able to do it by yourself but then slowly we realised that it just wasn't going to be possible"

Heather says "when it can up that yes they did need some help withy just bridging that gap yes we had no hesitation" Thanks to his parents Andrew and his wife Tracey have just moved into their first home - purchased with a guarantee of around 70 thousand... not only did it get the couple in the front door - it helped save them a fortune in fees. John Symonds from Aussie Home Loans, "they don't borrow as high a proportion they have a deposit that really comes from the parents and that can save them ten thousand dollars in mortgage insurance costs"

The good news for parents is thanks to new loan products and tighter laws; going guarantor isn't as risky as it used to be where parents could lose their homes if their kids defaulted on their loans "Today there are loans specifically structured to both give some protection to parents and assist children and I think that's a real good thing because the dream of home ownership is becoming an absolute impossibility" But even with better safety nets and even though it's your kids you're helping you should still treat it like a business deal - do your research and ask the questions.

"Well the first thing with respect to safeguards is read the contract and so many people don't" Financial planner Nick Bruining says parents shouldn't take going guarantor lightly. "Some questions we really need to ask before we agree to go guarantor is why do they need a guarantor what is the capacity of the person who is borrowing the money to actually repay the money" John Symond says "they understand their kids' financial position. Do they have credit cards how much do they owe on credit cards do they have a car loan what are the repayments on that"

Smart Money - helping your kids

Joint Ownership -

If you're not keen to be guarantor - you could consider going into property partnership and help your kids buy half their house through joint ownership. Nick Bruining says "certainly some families are looking at sort of joint ownership if you like where mum and dad are on the title deed of the property concerned now that can be okay but you need to look down the track a little bit because it actually becomes an investment as far as mum and dad are concerned"

If you're the buyer and your parents can't help - you could still jointly buy a property with friends or other family members - Real estate agent Paul Tonich, "some of the things we've seen lately are family syndications friends syndicating people buying one property as purely as an investment as their first property and not taking the grant"

Smart Money - helping your kids

Family Loan

Janet Durrant is like many young home buyers - who have struggled to save a deposit as house prices soar - again thanks to her parents she's now broken into the market. "They ended up giving me 20% as a deposit so that which I obviously had to pay back I've almost paid it back now but just so I could borrow less" For Janet's parents even though it meant actually forking out the money - they felt it was a better option than going guarantor. "We could guarantor Janet for that unit but it doesn't give her ownership the debt the ownership of the debt is still ours and we can rescue her we'd be still be the one that owed the money and so guarantor wasn't actually the way I would feel comfortable growing her understanding of how to raise money and get onto the property field"

Like going guarantor - a family loan can help save thousands in fees - Nick Bruining says "if you're in a position where you can lend the kids the money to start off with that's going to make it easier for them in the first instance it might allow them to buy the more expensive home and with a bit of luck it'll avoid the unnecessary or the cost of mortgage insurance"

Smart Money - helping your kids

You buy They rent

With rents soaring around Perth it's getting harder for first home buyers to save a deposit - for parents with equity in their home - buying an investment property could help their kids into the market down the track. It's a way of locking in today's housing prices for your kids. You buy the property and they rent it back... then in a couple of years they can buy it off you by which time equity should have acrewed - but there are catches and warnings.

Nick says "you've got to be very careful because there are tax implications and all those sorts of things the end of the day the government going to want to make sure that everything is done at what we call an arms length basis so things like stamp duty would be payable at the full rate capital gains tax potentially at the full rate so there's really no short cuts that you can take out"

Like anything to do with the property market - the best advice is to seek advice and do your homework. Paul Tonich says "do your research get on your websites like real rpdata the more research you do the better buying you'll do"