The Pro's and Con's of using BOMAD (the Bank of Mum and Dad)
- simone9004
- Jun 17
- 3 min read
As house prices continue to rise faster than our salaries, it si becoming increasingly difficult for First Home Buyers to "go it alone" and purchase their first home.
With the average time to save a 20% deposit blowing out to 14years, young home buyers need all the assistance they can get.
Fortunately for some, BOMAD (the Bank of Mum and Dad) is there to help.
According to recent data, 1 in 5 First Home Buyers have sought assistance from their parents in some form to buy their first home, and the statistics show that this provides these buyers with a significant advantage over those without such support.
On average parental assistance enabled buyers to enter the property market 2 years sooner.
Buyers saved approx. $140k on the median house price. Because on average, that's how much the median price rose in the 2 year period.
Purchasers had 41% more savings after buying their first home than those without parental help.
So how can your parents help so you can save money and time and get into the property market sooner?
There are several ways that parents can assist with your purchase:
Providing a gift of deposit funds
Providing a loan of funds for deposit
Being a guarantor on your loan
Being a co-borrower on your loan.
By combining family support with one or more government assistance programs, you can save a significant amount of money and time! These programs help reduce expenses like Stamp Duty and Lenders Mortgage Insurance. The possible savings on a $500k loan when utilizing these programs are:
First Home Owners Grant (FHOG) - this scheme reduces/eliminates State Government Stamp Duty. For people who are building their home, you will also get $10,000 towards the cost of the build. Current data shows an average saving of $15k.
The First Home Guarantee (FHBG) - this scheme allows First Home Buyers to purchase with as little as 5% deposit funds. On average this scheme saves buyers $15k on Lenders Mortgage Insurance costs.
The First Home Super Saver Scheme (FHSS) - This scheme allows you to make voluntary contributions into your super fund to save for your first home. This has shown tax savings of around 15% on deposits up to $50k.
Help to Buy shared equity scheme - the government will contribute to the purchase of your home in exchange for an equity share in the property. You can purchase with as little as 2% deposit. Up to $150k could be saved on a $500k loan.
Whilst all this is an excellent reason to discuss getting help from your parents, you should consult professionals, like your Mortgage Broker, who can provide detailed explanations, answer your questions, and help with application preparation.
At Gadsden Finance, we have extensive experience with providing loans to First Home Buyers with parental and government assistance. We place a strong focus on ensuring that all parties thoroughly comprehend and agree on the details involved. It is essential to be aware of any potential pitfalls or limitations associated with these schemes. Moreover, having an exit strategy is crucial to ensure your parents are reimbursed or freed from their commitment promptly.
Statistics from Finder.com.au
CONTACT GADSDEN FINANCE for a Free, no obligation chat to an industry expert with a wealth of experience and knowledge to help you on your way. (03) 5443 9098
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