The bank of mum and dad need not be a money changing hands thing.
If you have a parent with equity in their home you probably don’t know this secret BUT you might need as little as $0 deposit (not a typo) to buy a home of your own.
Here’s how it works for the $0 deposit:
- Your parent gives the bank a limited guarantee against their home, of 20% of your home’s purchase price (plus stamp duty).
- You buy the house with $0 deposit because the bank takes your new home and the limited guarantee amount from your folks as their security.
- IF you don’t make payments and the bank takes the property off you (naughty naughty), then they would sell it. If they lose money on the sale vs what you owe them then they will ask you for the cash and failing that they will ask your folks for the shortfall “up to” the amount of their guarantee. (by the way we don’t need a full loan application and hoop jumping from your parents)
- Let’s say you do make those loan repayments then after a few years we could always release your parents property as security and everyone lives happily ever after
- You just bought a house with no deposit…
Obviously there are risks and things we need to discuss such as incomes and exit strategy BUT we have helped many people use this niche and it works a treat. You know where to find me if you want a chat. Until then be nice to your folks!