There can be strings attached to a cash gift from mum and dad.
As teens many of us joked about ‘mum’s taxi service’ when we needed a lift to a mate’s place. By the time we’re in our twenties, many of us are hoping for a slightly more generous helping hand – like a down payment of cash towards our first home.
It turns out that older parents are playing a key role helping Gen Y Australians achieve dreams of home ownership. Research by National Seniors Australia shows the over-50s stepped in to help out their adult children to the tune of $23 billion in 2011.
But increasingly young home buyers are going it alone. A survey by RaboDirect found 64 per cent of Gen Ys don’t expect to need help from their parents, compared with 47 per cent last year.
Today’s softer property market could be behind the growing independence of first home buyers. However many cash-strapped Baby Boomers simply don’t have the money to give – one in three expects to still be paying off their own mortgage in retirement.
A cash hand out isn’t always the answer
Even where parents have the resources to hand over a lump sum of cash, it may not give first home buyers an advantage with lenders. That’s because lenders typically like to see evidence of a strong savings history. A one-off cash boost from your family isn’t a substitute for regular savings – so this is definitely something worth speaking about with your Aussie Broker.
Lots of ways to help
There are other ways parents can lend a hand – options that won’t leave kids feeling they’ve drained their folks’ retirement savings.
Around one in five Australian families have adult children living at home. It can see parents benefit from additional company, while the ‘kids’ can bypass rent to focus on growing a first home deposit. As long as adult children contribute to household expenses, it can be a win-win for everyone.