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Parental Guarantees get a bad rap, but that’s not necessarily so….

Malcolm Turnball recently teased Jon Faine about buying a place for his children and years ago many parents offered up the family home with little consideration for their own livelihood or retirement circumstances and sometimes tragically, lost their homes.  However, NOW banks have changed the way they attribute guarantees and parents can offer a limited guarantee which limits the amount the bank can claim back from the extra property offered as security.   This gives all a huge degree of protection.

Let me explain how it works…..

In order to avoid lenders mortgage insurance (an extra charge by lenders when the loan to value ratio is above 80%) people who have good servicing but not much in cash (usually first home buyers) can borrow 80% of the value of the place they are purchasing then the other 20% against a separate security – (the parents house – hopefully an investment property, not their own home). So the borrowers must have:

  1. 5% genunine savings which must be held for three months in their savings account (this is part of the deposit);
  2. 80% borrowed against the house they are purchasing; and
  3. 20% borrowed against the parents’ house making up the total cost of the house including stamp duty and legals.

So on a $500,000 purchase, this means the borrowers need $12,468 for stamp duty plus approximately $2000 for costs so rounded up a total of $515,000 in total for the purchase.

  1. $25,000 in genuine savings;
  2. they can borrow $400,000 against the new purchase property (80%LVR) and they need an extra loan of
  3. $90,000 which becomes the loan against the parents’ property. So should the children default and after the sale of the original property, the maximum the parents could be left with in debt is $90,000.
Sounds like a great way to get those 30 something Gen Y’s out the door.

Please note, Louise is going to the UK for a couple of weeks (she is singing at Royal Albert Hall!).  It will be “business as usual” at the Property Education Company, but please call Andrea on 0468 758 200 if you have any queries.

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Control Your Finances with Xero Cashbook – Free Online information session 7.00-7.30pm Monday June 27 2016

Colleen Tarrant from IN8 Business Advisory in hosting a free online information session to explain how Xero Cashbook can help people organise their personal finances to help them work out where they are now, and where they need to be in the future.  It is particularly useful for those with investment properties or business owners.

Click here to register and try to log in 5 minutes before the start time to make sure Zoom is working

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sda

Small Business Festival Victoria is being held during August and gives you the opportunity to hear from leaders in the business world, learn new skills and network with other small business operators.  There are 100s of low-cost and free events being held throughout Melbourne, Regional Victoria and on-line, covering a variety of business topics.

 

Visit the Festival website for more details

 
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Louise Lucas is participating in the Festival on August 9 (Melbourne) and
August 22 (Bayside) presenting on
“Top Tips for Business Finance Success”

Click here for more details and to register

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