Being financially smart and independent is one of the most important lessons we can teach our kids. Many young Australians are considering taking the leap into home ownership, but is it the right time? There are some things you can do to help your children figure things out.
A brief market update
Currently, reports are telling us that the property market is tipped to stabilise by the end of the year. This is mainly due to lower mortgage rates, improved housing affordability and ability to borrow, and increased confidence post the federal election. According to Domain, capital cities are likely to see property prices fall and then modestly grow in the early part of 2020. This means first home buyers may be starting to see opportunities to get into the property game.
Things to consider
There are things your kids will need to consider when deciding whether the time is right. Here are some steps for your kids to take:
Make sure you’re eligible for a home loan. No point in looking for your dream home if you have no idea how much money you can borrow. Also, research all your options.
Check to see whether you are eligible for any government grants or stamp duty concessions. These vary from state to state.
Ensure you have a decent deposit. The bigger your deposit, the more you’ll likely be able to borrow. If you don’t quite have the required deposit available, consider adding a co-borrower. You may decide to purchase a property with a sibling, friend or other family member. This means that you give that person equal share in the equity of the property and they have equal responsibility to make the loan repayments. Choose someone who is financially responsible so you know they’ll meet their end of the bargain. Ensure you seek legal advice prior to progressing with this.
Understand your expenses. Know where your money is going and how much you can afford to spend on mortgage repayments.
Don’t rush the process. This is a big decision, so take your time, do your research and visit as many properties as possible.
Owner occupier or investor?
Ask yourself questions such as:
● Can I afford to buy where I want to live?
● What flexibility do I want? While some
buyers want stability, others want the freedom to move freely if the opportunity arises. Being an owner occupier will make the latter difficult.
● What are the tax benefits, such as claiming back your expenses? If your purchase is an investment property, you may be able to claim items such as the interest portion of your mortgage, council rates, insurance and repairs (for the full list of what you can claim and the ATO rules click here). However, also consider the capital gains tax to pay when you sell.
Want to know more?
If you need some more assistance helping your children with their financial decisions, come in and have a chat. We can come up with a strategy tailored to you and your kids’ needs so they can make the best financial decisions for their circumstances.
1: Wiltshire, T. (2019). Domain’s Property Price Forecasts – June 2019. [online] Domain. Available at: https://www.domain.com.au/research/domains- property-price-forecasts-june-2019-851001/ [Accessed 30 Sep. 2019]. 2. Australian Securities & Investments Commission (2019). MoneySmart. [online] Moneysmart.gov.au. Available at: https://www.moneysmart.gov.au/life- events-and-you/life-events/buying-a-home#first [Accessed 30 Sep. 2019]. 3. Australian Securities & Investments Commission (2019). MoneySmart. [online] Moneysmart.gov.au. Available at: https://www.moneysmart.gov.au/borrowing-and- credit/borrowing-basics/loans-involving-family-and- friends [Accessed 30 Sep. 2019]. 4. Ato.gov.au. (2019). Rental expenses you can claim now. [online] Available at: https://www.ato.gov.au/General/Property/Residentia l-rental-properties/Rental-expenses-you-can-claim- now/.