Mortgage manager Bluebay has announced the launch of a patent-pending family loan, which it says lets parents help their children apply for a loan without becoming liable.
Called Smart Families, the loan does not require parents to use their home as security or be on the title.
Parents are able to contribute to the purchase price, but no more than 20%. There is also an inbuilt commercial agreement between the parents and the child.
Gerry O’Donnell, general manager of Bluebay Finance told Australian Broker Online the creation of the product was in response to young couples finding it increasingly difficult to come up with legitimate finance.
“Young couples are being pushed out of the competitive rental market and into home ownership. It takes the average couple nearly five years to save a home loan deposit,” he said.
“The ongoing interest repayment by the child to the parent is based on the principal sum and tied to the first mortgage interest rate.”
He said Smart Families offered brokers a “brand new solution” to clients.
“This isn’t available anywhere else on the market, especially for parents who want to help their children without putting their own home at risk.
“It can also help with a child’s serviceability, meaning that if they couldn’t get a loan approved before on a guarantor loan or 95% loan product, they may now be able to,” he said.