The Bank of Mum and Dad
With today’s market, it’s no surprise that young Aussies need to think of creative ways to enter the property market. In recent times, millennials are required to use other methods rather than the banks to kick start their dream of owning their own home. An emerging trend is evident with young investors turning to the ‘Bank of Mum and Dad’ for financial support.
We all know the banks make young investors jump through what seems like unlimited hoops to obtain funding. This seems to be one of the driving forces for the ‘kids’ to dive into the ‘Mum and Dad’ funds. The main form of help the kids receive consists of the following:
- Cash hand outs
- Contributing money towards a deposit
- Assistance with repayments
- Rent-free accommodation allowing kids to save for a deposit
- Guarantor loans
- Buying a property on behalf or, or as a partner of the child.
Where is the money coming from?
It appears that parents are finding a number of ways to fund this monetary assistance. These strategies include the following:
- Using their own savings
- Cutting back on expenses
- Tapping into their own home equity
- Delaying retirement
- Selling other assets.
This new ‘Bank of Mum and Dad’ is now Australia’s fifth largest mortgage lender and is the most popular way for young Australians to dip their toes into the property market. A financial comparison website called Mozo surveyed over 1000 people around Australia to assess the figures on mortgage lenders. The statistics indicate the Bank of Mum and Dad has lent $65.3 billion to their kids around Australia. Sitting behind the big four banks (Commonwealth Bank, Westpac, NAB and ANZ), the Bank of Mum and Dad’s ranking indicates a shift in funding, with many first home buyer’s incapable to independently purchase their first property.
Here at SPI, we always love to hear creative ways that investors implement when entering the property market. Once the funds are saved and the perfect property has been found, engaging an independent building inspector is the next step to finally put your mind at rest throughout your investor journey.
Contact us today for a free online quote or phone us directly on 1300 721 032.