How to help your kids onto the housing ladder frugally

The deposit hurdle

All parents want to give their kids a solid start in life, and finding ways for your children to get aboard the housing ladder sensibly often forms an important part of this challenge. While mortgage rates today are now lower than they have ever been, aiding serviceability and the monthly repayments, the biggest hurdle for many first homebuyers is saving the deposit to buy a first home.

During the most recent housing market growth cycle, deposit affordability deteriorated in Melbourne and Sydney in particular.

RegionValue to
income
Years to save
a deposit
Portion of income to
service a new mortgage
Proportion of income
to pay rent
Sydney10.113.549.1%30.8%
Melbourne8.511.341.2%26.1%
Brisbane6.68.832.0%27.9%
Adelaide6.99.333.7%30.5%
Perth6.08.029.0%28.0%
Hobart8.010.638.6%33.9%
Darwin4.86.423.4%28.9%
ACT6.68.832.0%27.7%
Regional NSW8.511.341.0%35.7%
Regional VIC7.19.434.2%29.9%
Regional QLD6.28.229.8%33.5%
Regional SA4.56.021.9%27.1%
Regional WA4.76.323.0%28.3%
Regional TAS6.89.133.0%33.1%
Regional NT5.47.125.9%32.2%
Combined capital cities8.010.738.9%28.2%
Combined regional areas6.89.133.0%32.7%
Australia7.710.237.2%29.4%
Figure 1: Affordability measures across the regions as at June 2021 / Source: Core Logic

Effective 1 July 2020 the Federal government has sought to address the deposit hurdle for a further 10,000 first homebuyers through its First Home Loan Deposit Scheme (FHLDS), while a raft of other incentives are also now in place to encourage a first move onto the ladder.

First homebuyer numbers will therefore likely ascend to the highest levels in more than a decade (since the last round of major incentives during the Rudd stimulus) in the second half of 2020.

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The bank of Mum and Dad

Parents have long grappled with how best to help their kids when it comes to their first home. Many parents choose to help with saving the deposit, for example by matching contributions to a savings account.

Others offer help with servicing the mortgage, though this may lead to repayment stress later if the mortgage size is too onerous. Others still opt for a family guarantee, which ensures that the child qualifies for the loan based upon their own income alone while providing additional security for the loan.

One of the ongoing challenges for parents is how best to treat their children equally when they’re inevitably going to experience their journeys at different stages in the market cycle.

Educate, negotiate, insure

The best way to empower your kids is often through looking after your own finances first and foremost, and through facilitating their education, in helping them to learn about what makes for a solid investment and life decision in property, thus ensuring that they buy well.

The best way to empower your kids is by looking after your own finances first and foremost, and by facilitating their financial education.

One solution we suggest that parents consider is to buy your kids one of our affordable WeBuy packages, saving your kids time, cost, and stress when buying their first home, and helping to ensure that they make the best possible buying decision.

One of our independent and trusted buyer’s agents can save you the cost of their fee and more through their in-depth property market knowledge, and through their experienced negotiation skills.

You may also think of our WeBuy package as a helping hand and a form of safety net, helping your kids to perform all the necessary due diligence processes and guiding them through all the key terms and conditions in a real estate contract.

In today’s more expensive housing markets, it’s become more critical than ever that your kids make a smart first move onto the housing ladder. Making an error or a poor decision could set them back years, or worse result in a painful financial loss, and sadly this is all too easy to do when you haven’t made a property purchase before.

Let us help you buy your next property

We help your children save time, money and stress by handpicking an expert buyers agent with local knowledge, to secure a home or investment property throughout Australia.