Helping your kids buy a home
Given the current property prices and living costs, an increasing number of buyers rely on family support to enter the housing market for the first time. Discover different ways you can assist your children in taking this significant step while safeguarding your financial interests
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Understand your options as a parent when helping your kids get a home
As the disparity between income levels, living costs, and housing affordability continues to grow, it is becoming increasingly difficult for younger generations to enter the property market in today's economic climate. Your financial support could significantly contribute to making their aspirations of homeownership a feasible reality.
Family Loans
Here is an option where you lend money to your children to assist them in purchasing a property. As with any loan, it's essential to have a discussion and reach an agreement on how the loan will operate. Here are some important questions to discuss with your children:
*Will the loan be interest-free, or will there be interest charged on it?
*When is the loan due for repayment? Will repayment be upon the sale of the property?
*Will you have a say in the type of home they purchase, or will the loan be hands-off?
Once you have agreed on the terms, the parents or family member providing the loan will need a lawyer to draft a Deed of Acknowledgment. This legal document will outline the terms of the loan, including repayment specifics
Gifts
This arrangement resembles a family loan, but differs in that a gift does not require repayment and is not subject to any interest. A gifting certificate must be issued for documentation purposes. Please let us know if you require a template.
This certificate specifies the gifted amount, the donor, and the recipient. It also confirms that there is no expectation for the gifted amount to be repaid in the future.
Acting as guarantor
You have the option to act as a guarantor. As a guarantor, you typically use your assets, usually your own home, as collateral for your children's home loan. It's a way to assist them in entering the property market without having to lend or gift a substantial amount of equity.
However, the risk for a guarantor is significant: if your children are unable to meet their loan obligations and terms, you will become responsible for the loan instead. This could have serious implications for you, potentially resulting in the loss of your own property.
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