May 11, 2018 1:47:30 PM

Helping your kids onto the property ladder

Topics: Retirement, Debt Consolidation, Mortgages, Savings, First Home Buyer, Bank of mum and dad 0

Despite a slowdown in property price increases, many first home buyers are still struggling to get a foot onto the property ladder. Which is why they’re turning to the bank of mum and dad for help. Is this a viable solution or are we just shifting the problem? Find out more about helping your kids onto the property ladder.


A slowdown in property price increases

House price rises across New Zealand appear to have slowed in the first quarter of 2018, as tighter bank lending criteria and higher deposit requirements have removed many buyers from the market and reduced sales volumes.

Housing policy changes have also been blamed for part of the slowdown in buyer demand, with Westpac forecasting a further 5 per cent drop in house prices across New Zealand over the next 4 years.

That being said, for many first home buyers, particularly those under 30 years of age who have not had enough time to save a 20 per cent deposit, buying a first home remains out of reach. Which is why their parents are stepping in to help. 

Here are 2 of the ways that you can help your children onto the property ladder.

  1. 1. Gifting: Help out with a cash contribution towards the deposit – effectively, an interest-free loan that your children will pay back when they can.
  2. 2. Guarantee: Provide a limited guarantee over your child’s first home by putting the equity in your own home up as security for your child’s loan. As guarantors, you’d be liable for the repayment of your child’s loan.

A help or a hindrance?

Some financial experts warn against parents helping their children in this way, saying it leads to an ever-widening gap between the property haves and have-nots, as only property-owning families will be able to help their children. Other concerns focus on the financial burden it places on parents who may be sacrificing their own financial security during retirement.

"We've seen situations where people have sold their family home and moved out of the city to free up money for kids. That may lead to greater isolation as they move away from their community and friends,” said Diane Maxwell, Retirement Commissioner. There is also the risk that parents would loan or give money that they would need later in life, Maxwell said.

Helping your children buy property – either with a cash gift or by acting as guarantor – is a big decision, so it’s vital you seek sound financial and legal advice before making any decisions. If you are considering helping your children buy their own home, get in touch with a Mortgage Express adviser to go through your finances to ensure you’re not left with a financial burden.



While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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