Parent equity home loan opens door to property market

More and more young Australians are taking up home ownership as they look to take advantage of today’s favourable market conditions, particularly for first homebuyers.

Companion Credit Union is a part of Community CPS Australia, and the Group’s Hunter-based General Manager Distribution Ray O’Brien says home ownership products such as Community CPS’ Parent Equity Home Loan have become a popular option for young borrowers, especially first homebuyers who are struggling to save the deposit required for a house.

“Relatively low interest rates and a competitively priced first homebuyers market have contributed to the uptake of the Parent Equity Home Loan increasing by 33.5 per cent in the last seven months alone. With the enhanced First Home Buyer and New Home Purchase incentives announced recently in the NSW State Government Budget, now more than ever is the right time to take the plunge and enter in to home ownership,” said Mr O’Brien.

“The home loan was designed so parents, parents-in-law or step-parents could help their children purchase their own home by using the equity in their property.”

Depending on how much a family member is willing to guarantee, the first homebuyer could borrow up to 100 per cent of the purchase price as well as an additional 10 per cent of the price to help with the associated costs of the purchase, such as stamp duty and other fees.

“With the Parent Equity Home Loan, we fund up to 80 per cent of the value of the property for the child, while the parents use the equity in their home to guarantee the balance of the loan,” he continued.

“As a responsible lender, we always like to see some savings history from the borrower, but we will lend up to 110 per cent of the purchase price, so parents would guarantee a maximum of 30 per cent.”

Using the Parent Equity Home Loan, first home buyers may be able to avoid paying Lenders Mortgage Insurance (LMI), which can amount to thousands of dollars. When the property increases in value or when the loan is sufficiently reduced, the guarantor can be released from the loan.

“Without the Parent Equity Home Loan I wouldn’t have been able to afford to buy my house when I did. I was actually renting the house when it went up for sale, and I was really keen to buy it because it felt like home. The Parent Equity Loan made this possible and I didn’t miss out on the opportunity,” said Ms Macey.

“I’m very grateful to my parents for supporting me through the Parent Equity Home Loan, otherwise it would have taken me a few more years to save up for the deposit and buy my first home.”

Mr O’Brien offers one last piece of advice when dealing with family.

“Be sure you keep a clear mind when entering into a financial agreement rather than having your judgement clouded by emotion. Our Parent Equity Home Loan product is ideal as it offers protection for both sides and limits the amount of exposure for parents.”

ABOUT THE COMMUNITY CPS AUSTRALIA GROUP

Two-time winner of Money magazine’s Credit Union of the Year award (2012, 2008) the Community CPS Australia Group is one of the largest customer owned financial institutions in Australia, with assets under management approaching $4 billion. The credit union employs 585 staff across 48 branches, servicing more than 180,000 members. Community CPS is located in South Australia and the Australian Capital Territory, and operates as Wagga Mutual Credit Union in Wagga Wagga, Companion Credit Union in the Hunter Valley and United Community Credit Union in Western Australia. Community CPS was also named Money magazine’s Best Credit Union in 2005.

The Group comprises activities in banking, the community (through the Community CPS Foundation) and professional services (wealth management, tax and accounting services via Eastwoods). For more information visit www.communitycps.com.au