Broker group endorses family loan product to help FHBs

by Julia Corderoy20 Nov 2014
Broker group Smartline has endorsed a home loan product it says will assist first home buyers get into the market by allowing parents to help their children buy a property without having to become a guarantor.

Smartline’s executive director Joe Sirianni says putting your own home on the line to guarantee a child’s debt can be fraught with problems.

“Many parents are keen to give their children assistance to give them that first leg up on the property ladder, which is admirable, but it is a big commitment,” he said.

“Providing a guarantee can, in the worst case scenario, leave the parents open to losing their home and the child can’t or won’t meet their debt obligations to the bank. Even without the worst happening, being a guarantor can still impact on the parents’ ability to borrow or sell the property.”

Non-bank lender Bluebay Home Loans offers a home loan called ‘Parent Assist’ which lets parents help their children apply for a loan without becoming liable. This means the children end up with two loans – one from the bank (for up to 90% of the house value) and the other from the parents (for a minimum of 10% and a maximum of 20%). 

The bank manages the repayments, security and paperwork for the parent's loan for the deposit. The children make regular repayments on both loans, with the interest rate on the loan from the parents half that of the main loan.

With first home buyers comprising an all-time low of 11.8% according to the latest Australian Bureau of Statistics data, Sirianni says brokers should be taking advantage of an innovative product like this.

“While some parents may have been very reluctant to provide financial assistance in the past, they should feel far more comfortable knowing they have security over the children's property,” he said.

“It will no doubt make it easier for children to ask for help, and for parents to be able to say yes, knowing they are protected.”



  • by Roger 20/11/2014 9:52:24 AM

    What a great concept. Well done Bluebay. I hope we see more of this innovative thinking to deal with a problem that potentially could see a whole generation locked out of the housing market.

  • by Tim H 20/11/2014 10:41:04 AM

    So assuming the parents don't have the cash they borrow the money themselves and lend it to the children to help buy the home and the children pay it back at an interest rate half of what the parents are paying to their lender.
    Seems the parents are still taking a risk with no guarantee the kids will make loan repayments and if a forced sale on the kids property then Bluebay take their loan, interest legals etc and the parents are left with whatever remains.
    The parents would also have to be in a position to show serviceability on any money they borrow.
    Sounds great for the children and Bluebay but still leaves the parents exposed.

  • by Gerry O'Donnell 20/11/2014 1:15:15 PM

    Tim H, No solution where parents are looking to assist their children is without some risk to the parent. Current practice of parent providing a Gift or Guarantee potentially leave the parent at greater risk than the product in question