Hi All,
I want do help my kids to buy their 1st property but still bother with pros and cons of this option.
Your inputs/advice are most welcomed.
Regards
Huey
I will help my kids when the time is right.
What are the cons for helping family out? As long as they are responsible I don’t see any.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by MortgageHunter:
What are the cons for helping family out? As long as they are responsible I don’t see any.I can.
The child will never have the satisfaction of being able to say that ‘I did it all myself’.
Thus in their own mind the legitimacy of achievement will be devalued compared to if they raised all their capital themselves.
About the best help parents can give is lead by example and thus inculcate the values that are conducive to saving money, investing, self-reliance and generosity.
What the child does with this is up to them and should not be subject to parental pressure.
Regards, Peter
Peter,
I think you have taken an extreme view.
Helping out and giving a property are two different things.
How does a young couple buy in places like Sydney now on their own? Letting them use equity in a property still has them saddled with the whole debt.
Did you teach your children to swim by leaving them alone in the water or were you there taking some of the weight until they could go on their own?
[
]Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by MortgageHunter:
>I think you have taken an extreme view.
Maybe it is extreme, but I thought I’d give Huey a con as the answers so far were supportive.
Another con I didn’t think of before was family politics, jealousies, etc which can flare up with money. If one child gets help, shouldn’t the sibling(s) get equal consideration, etc? Thus I would lean towards caution when it comes to large amounts.
>Helping out and giving a property are two different >things.
True. It’s up to each family to decide what’s best for them – full assistance, a little assistance or none at all.
As Huey says there are pros and cons, and though I’m glad I didn’t get parental assistance when I bought my IPs (which are considerably cheaper than the average Sydney house) others might welcome the opportunity.
>How does a young couple buy in places like Sydney now >on their own?
Difficult, but I hesitate to say it’s impossible.
Maybe they’d be better off renting in Sydney and buying IPs elsewhere first? Really depends on their aims.
Saving 10% deposit ($50k on a $500k house) should take about 5-6 years for a working couple (saving $5k pa each). Then there are other costs. Tough but not prohibitive.
>Did you teach your children to swim by leaving them >alone in the water or were you there taking some of >the weight until they could go on their own?
From what I remember swimming instructors would almost hold you under, while I would have much preferred to be left alone (feet on bottom, making a few token splashes)!
As to what I’d do if a parent, well I don’t know yet ; )
Regards, Peter
Peter,
Just a comment on a couple saving $50k for a deposit as you mentioned. If you assume that property doubles every 10 years on average, then they are still $25k short after 5 years.James
generally iw ould agree with peter but now im not so sure. our kids are gonna struggle big time, and the main problem will be the cost of education. i payed my own way but my hecs was only 15k. 100k is a different matter.
what we dont want is to end up like usa and japan where seemingly middle class kids are resorting to prostition, pornography and drug running to finance their education. thats scary and im not naive anough to say that it couldnt happen to me!!
Hi Huey & All,
I believe in helping family, to everyone here, maybe out of interest, but mid year, this year, my sister is turning 18 years of age, and as soon as she is turning 18, im going out all my way to help her in securing and gettin her own place.
Maybe you guys see this right or wrong, but i know as family, and i dont often get to see my family very much (actually hardly ever) i would love to help them in everyway, especially in seeing my younger brother and sister, being able to get into the property market, at the rate of how property prices are moving and increasing.
Remember you can help them, by being guarnantor or tying you property up as security what harm is that, if the loan is in there name and there the ones, who are taking on the responsility of paying and controlling the mortgage.
When my sister does turn 18, i will try to do my best in helping her, find and succeed in getting into the property market.
To be honest, if you watched the news quite often, you will have heard, that they say its almost impossbile for a child in high school and lower now, to be able and capable of purchasing their first or ever property, remember, when your old one day too, and i very much believe so too… Who do you think will take care of you…
Giving your kids and family a financial help now, might not just help and secure their future, but in time… hopefully they will return the favour to you… Remember each day we grow older, and one day we will need the help of some one younger and stronger to help us do things, that we might find harder in the future, but are easy right now….
Cheers,
sisSIS,
I think you are older than you let on!
A particular mature and well presented outlook for one of your age.
I will buy you a beer one day.
Cheers mate,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I’m not only going to help my twin girls out I am going to teach them how to multiply it, its not only giving that is precious its that the teaching we give we last long after we die.
‘Few random thoughts on this interesting thread
Many homeowners see their net family wealth going up, due to the property market. If the family owns one house, then I believe the reverse is true.
Example. I bought my first house four years ago for 200k, and is now worth 400k. Now, it doesnt take a genius to figure out I have 200k of capital. Most average people smile and think about their equity- isnt this great, we are getting ahead. But I have three ankle biters. Now, assuming that I would like my three sons to one day own their own home, lets see how much it would cost my family. Four years ago, cost=4*200=800k. Cost now =4*400-200(200 in equity)= 1400k. Thus, the future cost has increased by 600K.
The scary situation down the track is i) kids moving out to the sticks, where there are no jobs. ii) kids staying at home for much longer. Guess which one is usually the route taken?
The only way that I believe that your NET family wealth of housing cost (if there is such a term-but you get my drift) is if you have at least one house per child.
Personally, to help them into the market, I would do this. Firstly, NEVER go guarrantour for someone. If you are considering this, you do not understand the consequences, if you are seriously considering this, I believe that you are seriously naiive.
So how to get around it? A gift would certainly be better than signing an open ended cheque to the bank based on another persons future actions and life for 25 years, but I have a better option.
Have them stay at home, and have them buy an investment house for (say) five years, with the intentions of moving in after this. In the meantime, they must pay a fair board consisting of a sizable interest payment, food, phone, etc. This, plus the tenants rent should add up to quite a bit in five years. I reckon this is a brilliant idea (not least of all because I thought it up)
Any thoughts?
Originally posted by wrappack:Personally, to help them into the market, I would do this. Firstly, NEVER go guarrantour for someone. If you are considering this, you do not understand the consequences, if you are seriously considering this, I believe that you are seriously naiive.
So how to get around it? A gift would certainly be better than signing an open ended cheque to the bank based on another persons future actions and life for 25 years, but I have a better option.
Hi Wrappack,
just wondering? why your not interest in going guarantor? I honestly dont think your naive, if you do. I have gone gurantor for quite a few properties and honestly never looked back or worried about it. Especially if its family, i see the more you can do and help them its a good thing.
Just quick example, if you are to gift someone the money, you either can refinance, redraw or pull out money, doing this your debt gets bigger, but if you were to just go gurantor, then you are only typing up your property against the properyt they purchase.
The good example with going guarantor is, when their purchase property has gone up in value, you can get it re-evaluated and then have your property released as security, now in a booming market, this is no problem, but even in a slow market, eventually intime, their property will have gone up in value and you will still be able to release the security one day.
Cheers,
sisHelp as many people as u can on your path to financial freedom including family. This gives great satisfaction.
By helping I mean teaching and sharing, not doing it for them.
If some one is hungry how would they benefit most from me? If I was to give them a fish or teach them how to fish?
Regards Bear
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DONT MISS OUT!!!!!I think you should help your kids.
My parents helped me with my first purchase, i probably could have done it on my own, but the little money they added to my own deposit, as well as going
guarantor for the loan, alowed me easy entry into the property market. Now 5 years down the track, i have alot more to show with their initial help, but i did the rest on my own. I can also repay the money they lent me several times over if it was required without selling anything….Mum always tells me the story about 17% interest rates, she also told me that at the end of the week there was always some play money left over in the wallet or purse. Money went alot further 20 years ago, has income kept up with inflation since?
When you get to the stage late in life where u may need to rely on your kids for a change, u may consider what financial situation you can help them get into now, as it may be what supports your quality of life 30 years from now.
As for me, when i hav kids i will help them just as my parents did. Who can afford to start out on their own in sydney today and then throw in a family of their own down the track? not many i would think!
Jason.
Interesting topic,
As my Three children get older (eldest Daughter is 15 going on 21) their future financial situation is at the forefront in my thoughts,
My children like most today are educated academically but the vast majority are not educated in a financial sense, this is where we as parents can instill into our children our knowledge of wealth creation or Kiyosaki (rich dad poor dad) type of mindset, After all, most of us at one time or another have wished we had this information/knowledge at an earlier stage in life, our children tend to inherit our political and religious beliefs, then why not our strategies for wealth creation and a better life also,
I am prepared to help my children get a head start in life, be it a deposit or guarantor for an investment etc, what follows after that will be up to them.
Regards
Steven.Mortgage Broker
[email protected]
http://www.mobilemortgagemarket.com.au
Ph:0402483216
VictoriaPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Originally posted by mobilemortgage:
My children like most today are educated academically but the vast majority are not educated in a financial sense, this is where we as parents can instill into our children our knowledge of wealth creation or Kiyosaki (rich dad poor dad) type of mindset, After all, most of us at one time or another have wished we had this information/knowledge at an earlier stage in life, our children tend to inherit our political and religious beliefs, then why not our strategies for wealth creation and a better life alsoStrongly Agree!!! Values (led by example, not by lecture) are most important!
It’s an uphill battle to change a bad habit or mindset than reinforce a good one.
Greg Smith’s ‘Unlock your money personality’ says there are three main money personalities:
1. Spender (borrow for consumer items)
2. Cautious (scrimper, saver & turn off the lights please)
3. Savvy (ie educated investor)I was fortunate in being brought up 2. and trying to move towards 3. I am eternally thankful that I was not raised a 1. as the shift to 3 would have been much harder, as 2 will at least guarantee some capital to start your investments, whereas 1. won’t.
Regards, Peter
My parents helped me out with my first purchase (of half my grandparent’s house) by putting their property up as security, and going guarantor. I will be forever grateful, as there was no way (at 19) I would have had the deposit, even though I did manage to save about $8K in my first year and a half of working.
If you have more than 1 kid (i am 1 of 4) then I agree you do have to have a plan in how you can help all of them achieve ownership of their first house. Not all of them will want to do this at the same age, so it may be able to be spread out. My eldest brother was 24 (1996) when he bought his house, my sister and her husband were 26 (1999), and my younger brother (now 27) is only just showing interest in owning his own house.
So Mum and Dad have been able to help all of us – in different ways. Equity for me, cash for the other two, and probably a mixture for my brother when he’s ready to buy.
All houses have doubled in value, and my folks generosity has been, and will continue to be repaid in any way that we can.
Cheers
MelThought I would have to respond again regarding guarantour, cross collateralisation, and personal guarrantees.
Most people do not understand the significance of most of the pieces of paper we are asked to sign. If we are about to sign for our westpac loan, and we ask any questions (bearing in mind the answer will most likely come from an unlegally trained teller), we will most likely be told that “your loan is all approved, and just sign the standard form”, as I was.
Same goes for cross collateralisation, it is just a standard, and nothing will go wrong, will it?
What would be the safest thing (for yourself) to help your children out- Give (or lend) 100k, or go guarrantour for 50k? Well, it depends on what you have signed. Some of our (bloodthirsty) banks have, as part of their standard form, that you are personally liable for this loan, AND ANY OTHER LOAN TAKEN OUT BY THE OTHER PARTY AT ANY FUTURE TIME! A case on ACA (Ok, crap sensationalist ‘journalism’ I agree) had a few cases two or three years ago, where this exact thing happened. The elderly guarrantour for the house loan lost their house because of their sons failed business. Another got tens of thousands stolen by her fradulent son. How about mental illness?
These are a minute possibility, but do you want to risk your entire financial future on it? (As an aside, a cousin of mine is schizophrenic, and one of my proffessional colleagues was also. If this strikes, they may have no understanding of what they are doing, and (courtesy of privacy laws), you will not be told anything. How about drug addiction? One of my nurses had a lovely brother, A grade student, till he became a heroin addict. If someone was in this situation, how far will it go? Probably as far as repossession.
The statement ‘ I have gone gurantor for quite a few properties and honestly never looked back or worried about it. Especially if its family, i see the more you can do and help them its a good thing.’ Never worried about it? Come on, we all do our due dilligence before buying a place, so did you get INDEPENDANT legal advice, without the beneficiary present.
Similarly, the statement “but if you were to just go gurantor, then you are only typing up your property against the property they purchase” would have to send a shiver down any solicitors spine.
Just is my most disliked word in the english language, often used to minimalise the seriousness or difficulty of the following demand. The “only tying up your property” may be extended to all of their future loans (which you dont know about). What would you rather tie up, 50k in cash, or a 500+k house.
Watched the Ray Jamieson video, “6 ways to buy a house without a deposit”- a beauty, and dirt cheap too!. He went further, and said that if you had, say, 5*200k properties, and the bank wanted say 500k of collateral, to make sure that you only put up 3 properties, not your whole portfolio.
I think this is the valid point. Find out how much you are prepared to lose (like walking into the casino), and lend/ give less than that.
Ps another family member has a good gambling problem at the moment, up to 300-800 dollars a day when he plays the pokies and ponies. He recently sold his house, and guess where the monies going. What if someone had gone guarrantour for him 15 years ago. Would anyone suspect such a nice guy would do that to himself.
Nope, but I think in any form of investing/business you have got to consider the worst possibility. Plan a way to avoid it, or at least have a contingency plan to minamalise the damage.
A signed personal guarrantee, cross collateralisation, or putting up other assets is good for the recipient, and wonderful for the banks. I wonder where might the downside may lie?
These days, the banks enforce you to obtain independent legal advice if you are going guarantee. Their solicitors are not prepared to explain it to you, for fear of the backlash.
I owned the above mentioned property jointly with my Dad (after Grandma passed away), and I wanted to borrow more money against it (only in my name). The bank wouldn’t advise Dad, and made him go to an independent solicitor – who said that they wouldn’t give that advice in future. So the banks would now pretty much lend with co borrowers rather than guarantors, but if they do accept a guarantor, my experience is that they will ensure independent legal advice is obtained – and a certificate provided to that effect.
Cheers
Melsee – this is where we are heading
Home > World News > Article
Virginity sold for uni fees
February 10, 2004Print this article
Email to a friendA university distanced itself today from an impoverished student who has apparently sold her virginity on the internet to raise money to pay for “excessive tuition fees”.
Rosie Reid, an 18-year-old social policy first year student at Bristol University, hit the headlines when she put herself up for sale on a website last month.
According to the website, the online auction closed at midnight last night and the highest bid was STG8,400 ($A20,200).
The site says the winning bidder for the student, who is a lesbian and in “desperate financial crisis”, will be contacted on Wednesday.
A spokeswoman for the university said: “As far as the university is concerned, we have no comment as it’s not a university issue and the student is an adult.”
The website states: “Rosie’s auction highlights the financial problems that face today’s students.”
A spokesperson for Reid later said she refused to comment on the situation.
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