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Making the upfront payment or the house deposit is the hardest step for young people. Those who have just moved out of their parents’ home or have started working and have very little savings will struggle and find it almost impossible to make the down payment. Renting is unwise if you wish to create an asset. Owning a home is elusive for young people. Parents can certainly chip in to help with the house deposit or may even pay more if they can afford it. The problem lies in the inability of most parents to shell out the necessary cash. Most parents don’t have enough leverage to make such a financial commitment.
Fortunately, there are many ways parents can help with the house deposit for their child’s home. It could be the entire deposit, a part of it or more. Let us explore some very practical ways to achieve that.
Parents can always use some equity value of the property they own and use that money to fund the house deposit. Home equity can be used in many ways. Strata housing is a solution. Refinancing a mortgage or taking a loan against a property whose mortgage has been paid in full is also an option. There are lines of credit and other equity capitalisation options that parents can explore. Of course, these are confined to parents who own homes and have paid back most of the home loan or all of it.
Making investments for the long term or savings which would mature in time to make the house deposit is another effective strategy. Parents can get insured for a certain sum to mature at a time when their kids would move out. The sum assured would be guaranteed at the time of maturity and that money can be used to fund the house deposit. This is a great saving scheme as it not only pays for the house deposit and saves tax through the term when the premiums are paid but it would also insure the life of the parent and thus offer some financial security for the kids.
Another way of helping with the house deposit is by being a co-signer or a guarantor. It is quite possible that your children will not have the desired credit score or the down payment could be a bit too much given the loan amount and the financial profile. In such scenarios, a parent can become the guarantor or the co-signer which will increase the chances of getting the mortgage as well.
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