How to Help Your Children Purchase Their First Home
The ability for people to get into their own home has become increasingly more difficult over the past 10 years and although house prices have recently fallen, other factors such as high interest rates continue to make purchasing a first home prohibitive. The desire to see your children succeed and improve their position is one that most parents share and so it is important to understand what options you have when considering such an endeavour.
You could consider providing a cash gift to your child to use as a deposit towards their first home. This can help your children reach the required deposit amount faster and ultimately reduce the overall debt they are taking on.
If you’re not able to gift them an amount that allows your child to reach their required deposit, you can act as guarantors for their home loan. This involves using your own property as security for their loan. This can potentially help the child qualify for the loan amount they need or secure a lower interest rate, or both.
If you own property with significant equity, you could consider releasing some of that equity to provide their children with a deposit for their own home. Similar to acting as a guarantor, this option could help them qualify for the loan amount they need, secure a lower interest rate, or both.
Another option you may like to consider is to co-own the property with your children. This can be done in various ways, such as becoming tenants in common or joint tenants. Joint ownership could involve sharing the mortgage and other costs associated with the property.
If you have access to the required sum in cash, instead of gifting this to your child you could provide an interest-free or low-interest loan for the deposit. Similar to gifting, this can help reduce the amount the children need to borrow from a bank and assist them in reaching the necessary deposit to purchase their first home.
If you have younger children and are looking ahead at how you can help them get into their first home when the time comes, and are in the position to do so, a small regular Kiwisaver contribution is worth considering. This contribution to their Kiwisaver will generate a return over time and give them a little extra to their first home deposit.
It’s important for both parents and their children to have open and honest discussions about these options and any potential implications. Always consult with financial professionals before making any decisions to ensure they align with your family’s financial situation and goals and be sure to seek the necessary legal advice from your own, independent lawyer to ensure you are well informed.
Our specialist property lawyers can assist you with your situation, give us a call on 0800 773 377 or send us a message.