Login
ISCOVER
A senior industry figure has warned brokers about how the parents of borrowers could be jeopardising their children's opportunity to secure a home loan in the future.
Smartline Personal Mortgage Advisers executive director Joe Sirianni said brokers need to advise parents to be cautious about written confirmations that funds are a gift, if in fact there is an expectation the funds will be repaid in the future.
He said parents who want their children to repay the funds over time should consider assisting via a family equity guarantee.
“It’s dangerous and dishonest to advise a lender that funds provided to the child are a gift, if in fact you want that money repaid at some stage,” Mr Sirianni said.
“However, we are aware of many instances where people have provided a lender with written confirmation that the funds are a gift in order to ‘get around’ the bank’s lending criteria and secure the loan.”
Mr Sirianni noted the greatest danger is when the child receiving the money has a long-term de facto partner, because if the couple were to split, the house could be considered a joint asset.
“Consequently, it may be that a family equity loan – where the parents use some of the equity in their home to guarantee the child’s home loan – might be a better option,” Mr Sirianni said.
“It’s a much more formal and transparent arrangement which still allows the child to secure a home loan without the risk of potentially losing their parents’ funds in the future.”
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
[Related: FHB habits could be ‘recipe for disaster’]
