How can I help my kids get onto the property ladder?


We love property in Australia. About 70% of us live in our own homes and only about half of all home owners are still paying off a mortgage1


Increasing house prices are good news for property owners and investors, but can present real challenges for first home buyers and those wanting to buy their first investment property.

Speculation that property prices will continue to go up faster than wages means property can be a great way to build wealth―but at the same time it becomes harder for younger people to get onto the property ladder. It’s a vicious cycle.

Every parent wants the best for their kids. And we’re hearing from more and more parents and grandparents who’d like to help their children with property.

And while children may be living at home for longer these days, the family home can provide more than just a roof over their heads.

Many parents are using their homes to help their kids onto the property ladder―often instead of leaving a will. Research from The Australian Housing and Urban Research Institute project suggests that the family home acts more or less like a savings account for many Australians.

By paying off the home loan, and as the value of the home increases, the equity in the home builds. Parents are then releasing the built-up equity by borrowing against it and using the money to help their children.

If you can afford it, gifting a deposit can be a great start. A good deposit will reduce the amount your children need to borrow and reduce the amount of interest paid over the life of their home loan. But bear in mind if you receive Centrelink payments―particularly if you’re 60 or older―you’ll need to consider that a gift of this kind may impact your benefits.

If you’re like a lot of parents and don’t have a big pot of gold set aside for a rainy day, you can still help your children.

You can use the equity in your home as a guarantor and help your child qualify for a home loan. You should know that if your child fails to repay the debt your home could be put at risk—so think about this option carefully.

If you’re able to make more of a commitment you may want to sign as joint borrower on the home loan. This option isn’t for everyone because although you’d technically own only half of the property you’d have full financial responsibility if your child didn’t pay their part. It’s a big commitment and you’d need to understand all the risks and get the right advice.

You need to consider your own circumstances before deciding if and how you can help your kids. It’s a good idea to seek financial and legal advice so you fully understand the risks and benefits.

At the end of the day, whether you have a lot of money or not much at all one of the greatest practical gifts you can give your child is empowering them to be successful. Help your children develop sound money habits and help them prepare to buy.

You may provide an incentive and contribute $1 for every $2 they save for their deposit for example as well as:

  1. Teaching budgeting and savings habits from a young age—and remember to demonstrate these behaviours yourself
  2. Sharing stories about saving for your first home and let them know it gets easier over time—talk with them about building equity over time example
  3. Helping your children explore government assistance options, such as a first home buyer’s grant
  4. Talking about all that’s involved in buying property
  5. Helping them understand the real costs of purchasing a home—for example online calculators can help determine the stamp duty that may be payable.


1. Housing tenure data in the Census 2011


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