Find out how gifting can get your adult kids out of your house and into their own.
By Kirsty O’Hara
Every week numerous home loan applications cross our desks that include some level of family gifting. The kids are happy; they get their own place. The parents are happy; the kids move out and they get their space back. If you’re a first-home buyer and this sounds like you, you are not alone, this is the majority of first-home buyer applications.
If you’re a kind parent, wanting to help your adult child onto the property ladder, gifted deposits can be a better option, instead of guaranteeing or cross-securing your child’s new home against your existing property.
To answer three common gifting questions:
1. How much canI gift? Any amount of gifting can be included, from $5000 to$500,000. This can be added to the savings your adult child has been actively squirreling away.
2. I don’t have savings to gift! Now what? If you don’t have the gifted funds on hand in a savings account, some parents arrange a top-up* (secured against their existing home), we can help organise this top-up, to make the process simple and efficient.
3. What are Gifting Declarations? All family gifts need to be accompanied by a gifting declaration that confirms that the gift is a non-interest bearing, non-repayable gift with no encumbrances on the title. If you do want the loan repaid when your child sells the property in the future, this is generally okay, but the bank needs to approve the wording on the gifting declaration. VelocityFinancial have a couple of different loan and non-loan gifting templates that we share with clients, to make sure the wording is something the bank will feel comfortable signing off.
*If you’re not interested in arranging a top-up, this is where guaranteeing your child’s mortgage can be the better option; as it means that your existing home can be offered as security for the difference required to get their deposit to 20%. There are some things to keep in mind if you consider this option, see #3 and #4 below.
The five best things about gifting are:
If you want to learn more about how gifting works, please contact one of our advisors and they can give more tailored advice specific to your family situation.
Before you make any decisions you should talk through your specific family situations with an adviser from Velocity Financial and also potentially your families other professionals such as a lawyer and accountant to come up with the best solution for your specific situation.