Are Today’s Youth Using Family Homes to Get On The Property Ladder?

The Herald Sun posted an interesting article today about the growing popularity of family equity loans, enabling today’s youth to get their feet on the property ladder.


YOUNG battlers are resorting to unconventional ways to break into Melbourne’s housing market. 

 
A growing number of parents are using their own homes as security so their children don’t have to stump up a deposit.
Others are buying with friends and family, renting out a room or buying an investment property to make a start.
Aussie Carnegie mortgage broker Mark Daly said family equity loans, which can allow applicants to borrow the entire value of a home and avoid costly mortgage insurance, were becoming more popular with younger cash-strapped buyers.

Many had used their savings on flashy cars and big-screen TVs but weren’t willing to compromise on location or lifestyle for a home.
“They want everything now and suddenly discover they’ve got no cash,” he said. 

“The reason these options are popular is because people don’t have the savings.
“They have either spent it or the house they want is so expensive they need a bigger deposit.”
Aussie, Commonwealth Bank and ANZ were among lenders offering such deals, which many buyers were unaware existed.
Mortgage Choice spokeswoman Kristy Sheppard said about 1-2 per cent of first home buyers used a family equity loan. “Lenders became very risk averse when the GFC hit and in the couple of years following,” she said. “It’s only this year we’ve really seen them becoming less strict with their lending criteria.”
But she warned parents’ properties could be at risk if such deals went pear-shaped and it was crucial home buyers understood the discipline of saving.
Renewed focus on family equity loans comes after financial institutions raised the amount they lend for regular mortgages to up to 95 per cent of a home’s value, plus lenders’ mortgage insurance.
RAMS Home Loans and Bank of Melbourne also allow applicants to use rental payments as proof of an ability to save.
JPP Buyer Advocates’ Catherine Cashmore young buyers had grown up with what were once considered luxuries, but now regarded them as essential.
“That has been the norm for the generation that is coming up and it is getting worse,” Ms Cashmore said.
Single home buyers adamant on living close to the city could typically afford little more than a one-bedroom apartment.
“If you do not own your own home it’s a terrifying prospect thinking you are going to be going into old age sitting on the rental ladder,” she said. “It’s about getting your foot in the door and I would encourage everybody to think outside the box.”
Your Turn:
How hard will it be for your children to purchase their own house in the next ten years?  Would you be willing to risk your equity?   
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