Parent assist home loans

A new home loan product can help you get into the market with no deposit, and without risking your parents’ house.

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Saving a deposit is one of the biggest barriers to buying your first home. Lenders require at least a 5% deposit, and with the median Australian dwelling price hovering near $550,000, this is a significant chunk of cash.

In the past, lenders offered 100% no deposit home loans. Following the global financial crisis, these 100% home loan products disappeared, leaving guarantor loans as the sole way to buy a home with no deposit. However, an Australian lender recently released a product that helps first home buyers get into the market while easing the burden on parents to give a financial guarantee to their kids.

What is the Parent Assist Home Loan?

The Parent Assist Home Loan is a product offered through a single Australian lender, Blue[/fin_hide]bay Home Loans. It allows parents to loan their children from 5% up to 20% of the purchase price of a house. The rest of the purchase price is supplied by the lender in the form of a traditional home loan.

The parental loan is managed by the third party lender, with interest calculated at half the rate of the home loan. This enables first home buyers to buy without a deposit. If parents lend 20% of the property’s purchase price, buyers can also avoid paying for lenders mortgage insurance (LMI).

How does it differ from a guarantor loan?

The Parent Assist Home Loan is different than a guarantor home loan because parents don’t have to offer their own home as security for the loan.

A guarantor home loan allows parents to use the equity in their home as security for their child’s home loan. While this can also allow buyers to purchase a home without a deposit and potentially avoid LMI, it can also put their parents’ home at risk. This is because the parental home is offered as security on the loan, so if the child defaults on the loan, the lender can seek recourse from the parents, who could even be forced to sell their family home to repay the loan.

By contrast, the Parent Assist Home Loan is structured as a loan from parent to child. Parents don’t have to use their home as security, and because the product is offered as a legally binding loan, parents can be certain to recoup the money they lend. The loan has the added benefit of generating a return for parents.

Find a guarantor home loan now

How do I pay it back?

The Parent Assist Home Loan is repaid like a regular home loan, but your parents’ portion of the loan is repaid when you sell your home or refinance your mortgage.

You can also choose to repay your parents when you’ve built up enough equity in your home. Also, if you make extra repayments on your home loan, the extra funds will be applied to your parents’ portion of the loan first.

Can my parents gift my deposit?

A parental loan could enable you to enter the property market much sooner than if you had to save a deposit, but couldn’t your parents just give you the money for your deposit without the expectation of repaying it?

While your parents can gift funds to you for your deposit, lenders generally require you to have some genuine savings of your own. The minimum amount for genuine savings is usually 5%. So even if your parents are willing to give you obligation-free funds for your home loan deposit, you’ll still have to save 5% yourself.

By contrast, the Parent Assist Home Loan enables you to purchase with no genuine savings, and no deposit funds of your own.

Learn more about saving a deposit for a home

Can my parents just purchase part of the property?

Another alternative to guarantor loans is co-owning a house with your parents. In this arrangement, your parents could buy part of the property and be listed on the title as tenants in common. This also enables you to buy without a deposit or genuine savings.

However, this differs from the Parent Assist Home Loan because having your parents listed as co-owners would make you ineligible for any First Home Owner Grants (FHOGs) offered in your state or territory. With the Parent Assist Home Loan, you could still be eligible for the FHOG, depending on the price of the home you’re purchasing.

How do I get a Parent Assist Home Loan?

The Parent Assist Home Loan is only offered through Bluebay Home Loans. You can apply through their website.

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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback.
A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get up $4,000 cashback for their first application (Other terms, conditions and exclusions apply).
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR ≤ 80% (Owner Occupier, P&I)
2.68%
2.69%
$0
$0 p.a.
80%
$2,000 to $3,000 refinance cashback.
Get a competitive variable interest rate with no application fee or ongoing fees. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.34%
2.34%
$0
$0 p.a.
60%
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.44%
2.46%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
2.17%
2.20%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest (Offset Available)
2.39%
2.40%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
IMB Budget Home Loan - LVR ≤80% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.61%
2.67%
$449
$0 p.a.
80%
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
2.39%
2.42%
$0
$0 p.a.
80%
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
Tic:Toc Live in Loan Fixed Rate Home Loan - 2 Year (Owner Occupier, P&I)
2.09%
2.35%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
Bank of Melbourne Basic Home Loan - Special Offer (Owner Occupiers, P&I) LVR above 60% up to 80%
2.64%
2.66%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback
A competitive variable rate loan from Bank of Melbourne. Refinancers borrowing $250,000 or more can get up $4,000 cashback for their first application (Other terms, conditions and exclusions apply).
AMP Bank Professional Package Variable Rate Home Loan - $100,000 and above, LVR ≤ 80% incl. LMI (Owner Occupier, P&I)
2.59%
3.00%
$0
$349 p.a.
80%
Get a sharp rate with no application or settlement fee, a redraw facility and 100% offset account. Other fees and charges apply.
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2 Responses

  1. Default Gravatar
    JessAugust 11, 2018

    I was just seeing I’m looking at buying my grandparents place that is worth $250,000 but I’m only buying it for $210,000 and then I have a share that comes off which is $17,000. I was just seeing if my parents can gift me the $40,000 less I’m getting it for and use that and my share of $17,000 as a deposit?

    • Avatarfinder Customer Care
      JoshuaAugust 22, 2018Staff

      Hi Jess,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      Yes, your parents can gift you the money. However, you need to remember, as what our page mentioned, that lenders generally require you to have some genuine savings of your own. The minimum amount for genuine savings is usually 5%. So even if your parents are willing to give you obligation-free funds for your home loan deposit, you’ll still have to save 5% yourself.

      You might also want to speak to a mortgage broker to explore other options and obtain a more personalised advice.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

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