First home buyers turn to Bank of Nan and Pop
Nan and Pop have always been good for birthday money, but one-in-10 grandparents are taking their generosity to the next level: helping their grandkids buy a first home.
Most of us have special memories of pocketing a few treats from Granny and Gramps.
But it turns out those small gestures of affection we knew as kids are morphing into something far more valuable than a few sneaky lollies before dinner or a surprise Lego set.
Research by Compare the Market shows almost three-quarters of Aussie grandparents are giving their families a financial helping hand.
Around 13% are lending money, 9% are chipping in with household bills, and one-in-10 are helping their grandkids buy a first home.
It goes to show that we’re never too old for grandparents’ treats.
But if your Gramps and Granny are keen to help you get started in the property market, it’s important to have some open conversations first.
How grandparents can help
It’s not unusual for first home buyers to need support from family – especially in this day and age – and it can come in a variety of ways.
One option is for a close relative to act as a guarantor for a first home buyer’s loan.
It’s a big ask for grandparents though.
If the borrower can’t keep up the loan repayments, a lender can ask the guarantor to pay off the debt – something that could leave Nan and Pop financially skewered.
If they can afford it, another way for grandparents to help their grandkids buy a home is by gifting money.
What to be aware of
A cash gift doesn’t have to be huge to make a difference.
It can help grow a deposit or go towards upfront buying costs such as lenders’ mortgage insurance.
However, there are traps to be aware of.
You could get a ‘please explain’ from a lender when they see a lump sum of cash land in your bank account.
The bank may want to be sure it’s not a loan that grandma and grandpa expect to be repaid.
So, it can be a good idea for grandparents to write a letter spelling out that they are gifting the money unconditionally with no strings attached.
And while this should go without saying, it would be negligent of us not to stress the importance of nan and/or pop being completely sound of mind when gifting any money.
The last thing you’d want to do is leave them short in funding their retirement, or start a rift (or legal battle) with other family members who love and care for them as much as you.
Talk to us to find out how family can help
Buying a first home is a special milestone, and it’s extra special when family members rally around to lend a hand.
But as we’ve outlined today, it’s not without its potential pitfalls.
So call us today to find out the different ways your family might be able to help you buy a place of your own.
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