With living costs rising, it can seem impossible to save enough money for a house deposit.
If you are considering asking for a loan from your parents for a house, there are a few things to think about first.
To avoid any relationship damage, good preparation and communication are key when it comes to asking your parents to lend money.
Do it in person
Asking your parents for financial assistance to buy a house is a serious commitment and it’s important you talk to your parents in person to show them you fully understand this.
Talking face to face will avoid any miscommunication and will give all parties the opportunity to discuss the ins and outs of the arrangement.
Ensure the arrangements are clear
Nobody wants to sabotage the relationship with their parents over money. If you’ll be paying the deposit money back to your parents, clearly discuss the arrangements of the loan.
Ensure you cover exactly how much you wish to borrow and how you will pay them back.
Get them involved
If your parents agree to gifting or loaning you money for a house deposit, they may like to be involved in the process.
Ask your parents to come along to inspect potential houses and show them you value their opinion. Afterall, your parents are the reason you’re looking at houses.
How else can your parents help?
If your parents can’t help you out with money for a house deposit, they may consider other ways to help you get into your own home.
Your parents may be open to the idea of being guarantors on your loan. If they have paid off their own mortgage and now own their home, they may be able to use the equity in their home as security for your loan.
By being guarantors, they are legally obliged to continue servicing payments on your loan if you are unable to.
If you’re having trouble saving money for a large deposit but will be comfortable making repayments, having your parents guarantee your loan will help you buy a house without a huge deposit while also helping you to avoid paying Lenders Mortgage Insurance (LMI).
Rather than asking for a loan from your parents for a house, another option to consider is asking if you can move back home.
Rent absorbs a large portion of your income and restricts the amount of money you can put aside for a house deposit.
Asking your parents to move back home is one way you can save considerable cash.
Again, it’s important to discuss the arrangements with your parents before moving back home, especially in terms of how much money you will contribute towards utilities and food.
Respect their decision
If your parents can’t lend you money, respect their decision.
Although you may think otherwise, your parents may not be in the financial position to lend a large sum of money and it’s important not to put them in an uncomfortable position.