Ryan Coward, 26, saved for and bought his first home independently.
Ryan Coward, 26, saved for and bought his first home independently.

Bank of mum and dad to close doors

THE Bank of Mum and Dad is being urged to consider turning off the money taps as an increasing range of mortgage products helps young homebuyers fend for themselves.

Shared equity schemes - where lenders shared in capital growth in return for a lower loan amount - are expanding across Australia and reducing pressure on parents to pay deposits or go guarantor.

Low-deposit loans by government authorities and other lenders help people such as university graduates and singles buy homes faster and avoid expensive lenders mortgage insurance.

And the Federal Government's first home super saver scheme allows buyers to boost their savings in the low-tax superannuation environment.

Ryan Coward, 26, bought a three-bedroom home using a HomeStart finance graduate loan - which only requires deposits below 6 per cent.

Ryan Coward says it was a good feeling to buy his first home without parents’ financial help.
Ryan Coward says it was a good feeling to buy his first home without parents’ financial help.

"Lots of people my age receive parental assistance, particularly in relation to the deposit, but I had no financial help," he said.

"My parents supported me and came with me to opens, but I'm really happy that I've done it on my own. It's a good feeling knowing that I am financially independent."

HomeStart CEO John Oliver said parents trying to "be the bank" were putting their own financial security in jeopardy.

Fairness also came into the equation for parents with more than one child, he said. "What about child two, three, maybe four? I know that as parents we all want to help our children equally, so being the bank for one will ultimately create future financial pressure for you when your other children are ready to buy their first home."

Planning for Prosperity senior adviser Bob Budreika said banks should never have allowed so many parents to go guarantor for their children's mortgages and stump up their own homes as security.

"Parents can't help themselves. They can't say no," he said.

"People do not realise the risk they are running. A reverse mortgage at retirement age is a better option - there's no need for regular repayments, parents can't lose their home and they still have the ability to repay."

Young buyers needed to lower their "champagne expectations", Mr Budreika said. "A lot of people are overextending themselves and I believe it's even more dangerous for parents overextending themselves."


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