Australian parents forked out more than $65 billion last year to help their children enter the property market, making the Bank of Mum and Dad the fifth larger home lender in the country. Only the big four banks provide more financial assistance to young people.
New Mozo research found 29 percent of Australian parents help their children get a foothold on the real estate market with generous financial contributions. Forty-three percent of parents go beyond financial support, allowing their children to live at home without paying rent so they can save for a deposit more easily. Many other parents also act as guarantors for their children’s loans and assist with mortgage repayments.
Parents in New South Wales were the most generous, lending an average of $88,350 per family to help their kids buy their first homes. Victorian parents were the next generous with average contributions of approximately $63,000 per family. Perhaps it’s most surprising to note two-thirds of parents don’t expect their children to repay the sum.
It’s likely that modern parents are so giving because they understand house prices have increased by 618 percent since the 1980s. Rental prices have also increased in line with this, making it difficult for young Aussies to buy homes without parental assistance.
You might assume that the mums and dads who help their kids buy homes are financially secure, but that’s not always the case. Two-thirds dip into their own savings while more than a quarter cut back on their spending. Some parents are even mortgaging the equity in their own homes to help their kids.
At Chase Edwards, we understand that entering the property market isn’t easy. However, we think it’s important parents don’t jeopardize their retirement plans to help their kids purchase their own homes. We encourage all parents to call us on 1300 854 833 to arrange a free financial health check before tying up money in a child’s mortgage. We’ll provide an honest appraisal of your financial situation and offer strategies that can help you help your kids without putting your retirement at risk.