Family equity helps first home buyers
First home buyers having trouble saving for a home loan deposit can enter the real estate market by drawing on the equity in a family property, according to mortgage broker Loan Market.
Loan Market Melbourne broker Josh Gilbert said family equity options were available to help first home buyers and families entering the residential real estate market.
"They are becoming increasingly popular with people wanting to get into the property market and they can also enable some first time buyers to purchase their property at a higher level," Mr Gilbert said.
Mr Gilbert said under the family equity guarantor's support policy, parents or another immediate family member can help with loan servicing and security support.
"The most popular of the family equity options is the limited liability guarantor and we are noticing an increase in inquiries for this in the bayside Melbourne area," he said.
"Under this option two loans are taken out, one at 80 per cent of the property value, which is secured by the purchaser, and one at the remaining required percentage which is secured by the property of parents or another family member.
"The benefit of this option is there is no requirement for lenders mortgage insurance and no need to show proof of genuine savings required under a 90 per cent Loan to Valuation Ratio (LVR)."
Mr Gilbert said parents can be relieved of the equity responsibility once the total loan value reaches less than 80 per cent of the property value.
"But all parties do need to be aware that in the case of a default, the family members are liable for the 20 per cent they secured," he said.
Mr Gilbert said the family equity option was ideal for first time buyers with healthy incomes but limited savings and also enabled them to enter the market at a higher level.