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La Trobe formalises parent-child mortgages

by Nick Bendel10 minute read
The Adviser

A new product from La Trobe Financial allows parents to formally help their children secure a mortgage “without the need of a costly bank guarantee”.

The P2C product allows parents to decide how much of the loan they want to take on. They also decide what interest rate to charge, although it must be at least 50 basis points above the CPI.

La Trobe said P2C would make it easier for young Australians to achieve home ownership.

The product is also designed to protect the parents’ investment without exposing their assets or credit file profile to any risks associated with their child running into difficulty with repayments.

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La Trobe’s head of funds management, Chris Andrews, said parental assistance could help younger Australians save tens of thousands of dollars on LMI.

“The parents’ contribution will be secured by way of a registered mortgage, ensuring they have rights to the money at all times in the event of non-payment by the child following a marital or deceased estate dispute,” he said.

“The P2C is a better way for parents to help children achieve their property ownership dream, and importantly, their investment is properly protected without the need of a costly bank guarantee and potential loss of the parents’ property.

“It’s really a wealth management credit product and designed to protect families with intergenerational wealth transfer and assist children buy into the current increasing house prices.”

La Trobe said younger Australians are finding it harder and harder to get a foothold on the property ladder.

“As housing is a core part of any individual’s wealth creation, it is important that housing continues to be an affordable asset to acquire,” La Trobe said.

[Related: La Trobe forecasts ‘record year’]

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