Family Equity & Parental Assistance

The increase in house prices over recent years has turned the Australian dream of home ownership into a challenge for many young people.

BuildingWA.com.au spoke to Don Crellin, General Manager of Resolve Finance, to find our more about family equity home loans. "Parents can use the equity in their home/s to assist their children with purchasing a home of their own.  Family equity loans can take the shape of parents going guarantor to secure the loan or helping to service the repayments of the loan."

With the assistance of a family member, you may be able to avoid paying lenders mortgage insurance (LMI), which can amount to thousands of dollars, and still borrow the amount you require.  

Don points out that "When the property increases in value or when the loan is sufficiently paid down, the guarantor can be released from the loan".

Regardless of whether you're the family member providing the equity or you're the borrower, there are many financial implications involved in this type of arrangement. "When dealing with family, it is important to keep a clear mind when entering into a financial agreement.  Rather than having your judgement clouded by emotion, treat the agreement like a business deal to avoid causing potential family issues".

Most family equity home loans offer protection for both sides and limit the amount of exposure to the guarantor.