Parents to step in as FHB boosts end

by Adam Smith13 Jun 2012

Parent equity home loans may surge in popularity as state governments wind back subsidies to first homebuyers.

1300 Home Loans managing director John Kolenda has predicted that states set to see first homebuyer bonus schemes end will experience a rise in mortgage equity loans. Victoria is set to wind back its $13,000 first homebuyer bonus and its $6,500 regional bonus on June 30, with SA following suit on July 1 as it halves its first homebuyer grant, abolishing it entirely by July 1, 2013.

"Mortgage equity home loans have become steadily more common in recent years as housing affordability has deteriorated and that is likely to snowball as various state governments reduce their support for the real estate in," Kolenda said.

Kolenda said more parents could begin to serve as guarantors on their childrens' mortgages as the schemes come to an end.

"These loans have many benefits including allowing children to avoid expensive Lenders Mortgage Insurance that is paid by borrowers - often young people - with low equity," he said.