It is natural for parents to want to see their kids succeed, especially when it comes to building their financial future. When your kids are grown up, do they have the skills and tools to make their first home purchase?
While you may have the parental instinct to push them up the property ladder yourselves, it is important for your kids to learn how to do it themselves. So how can you help give your kids financial independence, whilst also minimising the risks all first home buyers face?
Saving for a deposit
One of the biggest hurdles facing first home buyers is actually saving for the deposit. This will require discipline and motivation. Looking at the types of properties that they may be interested in purchasing in the future and actually helping them crunch the numbers will give them a real insight into how much they need to save and be realistic about the purchase price.
Calculating a 5 or 10% deposit along with Stamp Duty and then working out how much they can put aside weekly, will give them a timeframe for when they will have saved a sufficient deposit. Weekly savings can also get them used to a commitment like mortgage repayments once they purchase.
Know what you can afford
While your kids may be able to afford their lifestyle living at home, they may be shocked when they realise how many expenses there really are once they leave home. As a result, they may end up deep in debt, struggling to cope with the cost of living.
You can help prevent your children from reaching this point by showing them how to budget effectively. Make sure they know about all the expenses involved once they move out and buy a house of their own. Expenses such as insurance, maintenance costs, rates, food and emergency expenses should all be included in the monthly budget.
By doing this before they move out, your children will have a realistic idea about how much they can afford for mortgage repayments and will then be able to look for a property they will actually be able to afford along with all of their other expenses.
Before you can purchase a property, you will need to have your finance ready. Obtaining a home loan pre-approval early will give you a guide as to much you can purchase a property for. Also, as you have already completed the groundwork for the home loan application, you can confidently make an offer or bid at a property auction.
Understanding how much you can borrow is quick and easy and can be completed on the go. To get a quick snapshot of how your loan stacks up, try the State Custodians Instant Online Pre-Appoval. It only takes a few minutes and gives you an instant result on-screen and an email confirmation of the details - perfect for when you’re out and about.
For formal pre-approval, you will need to complete an application and supply your documents like payslips etc. But don't think you have to wait in a queue. You can apply online at a time and place that suits you.
When it comes to buying their first home, your kids probably aren't thinking too far into the future. They want a property that will suit their needs now, but it is important to teach your children to plan for the future. This might be when they decide to relocate or wish to use their equity to purchase another property. They need to think about not only will the property suit their own personal needs now, but will it be a good long-term investment?
Be wary of fixer-uppers
Your kids may think it'll be fun to buy a renovator's delight and fix it up, but they need to be aware of both the positives and negatives of buying a fixer-upper.
While the property may be cheaper, will they have the money, determination and patience to successfully renovate the property? The first couple of months may be fun painting and knocking down walls, but if they run out of motivation and/or money, selling a half-renovated property could end up costing them down the track.
Buying a fixer-upper can be worth it, but buyers need to be smart about their decisions to ensure they don't overspend. If your kids are serious about it, sit down with them and go over the expenses thoroughly so they know what they will be faced with.
For a first home buyer, it is important to surround them with professionals that will provide direction and advice on all aspect of purchasing a property.
Building and pest inspections are a must to ensure there are no hidden nasties that could end up costing you later. A solicitor can advise on the legal aspects of the purchase and the rights of the buyer including when to put down the deposit. Having a trusted lending specialist is also invaluable. They can help crunch the numbers upfront, explain how lending works and guide them through the process of purchasing.
Giving your kids the tools they need to purchase their first home will be one of the most valuable gifts you can give. If your children are looking for a home loan and want to speak to an industry expert about their options, our Lending Specialist team is here to help. State Custodians has some of the most competitive home loan products on the market and our experienced Lending Specialists can go through the options with you one on one. Give our friendly team a call today on 13 72 62 or leave your details here and they will give you a call.