Is this a good idea?
Considering the high cost of housing, parents acting as guarantors could be the only way left for some children to get into property.
However, some experts say that if a child gets into financial difficulty he/she may get yourself into financial difficulty as well and you could risk losing your home.
Considering the high cost of housing, parents acting as guarantors could be the only way left for some children to get into property.
However, some experts say that if a child gets into financial difficulty he/she may get yourself into financial difficulty as well and you could risk losing your home.
Most people are aware that family members, usually parents, can act as guarantor on their personal loan. But many aren't aware that family can also act as a home loan guarantor.
'Family equity loans' allow kin such as parents or grandparents to provide a guarantee in support of a borrower's home loan application by using equity in their own property as security.
This approach helps bridge the borrower's upfront expenses and deposit gap, assisting them in gaining loan approval and maximising the amount they can borrow. It also removes the need for lenders mortgage insurance, which can be costly.
From what I'm hearing, there are two subgroups driving this phenomenon:
1. Generation Y and Generation X needing a little financial help to buy a home; and
2. Parents wanting children to finally leave the family nest and invest in their future via property.
You may have a laugh at the second point, but our loan consultants are seeing it happening with more frequency than ever! Not surprising given the much-talked-about propensity for Gen Y to soak up the security and cost-savings of living with parents for longer.
However, these parents may be on to something ...
more here
http://blogs.domain.com.au/2009/04/guest_blogger_should_families_1.html