Using family support to purchase your first home

It is a given that saving for your first home is very difficult, especially if you have to pay rent and save money at the same time.  In generations past, people saved hard for a downpayment, or what is commonly known today as a deposit.   They often worked two jobs and went without most of life’s little luxuries.

These days some lenders, such as Breez Finance, offers loans where families can support their loved ones by mortgaging their homes to access additional equity, or by guaranteeing their loan.

Family equity loans allow family to provide a guarantee in support of a borrower's home loan by using equity in their own property as security.  This helps to bridge the borrower's deposit, loan and property expenses to assist them gain a loan approval and maximise the amount they can borrow. It also removes the need for lenders mortgage insurance, which is expensive.

An increasing trend is for people to buy property jointly by pooling their resources with family members. The main benefit of buying a joint property is it can provide a means to enter the property market. However, if you choose this option you need to be fully aware of the pitfalls.

Some tips to consider are:

Will you register your property as Joint Tenants or Tenants in common?

It is important to understand that these options have different legal ramifications for each borrower against the loan. Discussing your personal situation with your solicitor will help determine which way is best for you.

What happens if the borrower defaults on his or her home loan payments?

Buying a property together means you become co-borrowers on the same mortgage loan, which means that each borrower is “jointly and severally liable” for the whole loan.  This means that if one person defaults on the home loan, the other person/s listed on the mortgage will be held responsible.

Are borrowers eligible to receive the First Home Owner Grant if buying a joint property?

When buying a property with someone else, you will still be able to get the First home owner grant only if all co-purchasers on the mortgage are eligible to receive it.

For more information about a Family Support Loan contact one of our Loans Officers or click here to have a Breez Loans Officer contact you.