Funding Options

Home ownership is a big responsibility and commitment. As you plan to buy your first house, you need to be knowledgeable and resourceful to sort through the best deals.

This guide is a 6 minute read

Smiling adult man with his arm around an older woman, both looking at the camera outdoors. The woman is wearing glasses and a light shirt, while the man is wearing a casual blue button-up shirt.

In this Guide, we’ll help you consider:

Using your savings
Selling assets
Loans and guarantees
Summary of all options

Remember that a good rule of thumb is to only give what you can afford, both today and tomorrow: Don’t risk your future dreams and plans.

Using your savings

If you are fortunate enough to have spare cash in savings, you can simply gift or lend that money to your child now. Or, if you are above the pension age, you can potentially draw down on your superannuation.

While these options do “bring forward the inheritance”, eating into a nest-egg can have implications on your lifestyle and long-term wealth.

Selling assets

Beyond cash savings, you may have other assets you can sell, such as a holiday home or share portfolio.

And if you choose to sell assets, bear in mind that you are giving up any future appreciation in the value of those assets, and may have to pay tax on any accumulated gain, which can reduce your net proceeds.

As with savings, you should consider whether the reduction in your nest-egg has any implications on your lifestyle and long-term wealth.

Loans and guarantees

There are a range of loans available in the market to help you fund your child’s purchase.

Loan option	Typical age of access	Proof of income	Equity in your home
Inviva's home equity release loan You take funds from your home equity, typically with no fixed term and a variable interest rate	55+	No	Yes
Parental Guarantee You provide a bank with a guarantee that your child will make repayments	< 55	Yes	Yes
Co Borrower You and your child jointly take out a bank loan	< 55	Yes	No
Standard bank loan You take out a bank loan	< 55	Yes	Yes

Note that there are a number of other specialist loan schemes that are available to first home buyers, some of which involve “shared purchase” or “rent to own” schemes. These are not shown in the table above, as features and terms and conditions vary widely.

‍Inviva's home equity release loan

Inviva's home equity release loan allows over 55s to release equity in their home for any worthwhile purpose. With Inviva, you can receive a lump sum which you can pass on to your child but also access funds as a line of credit or regular income payment to use for your own needs – travel, renovations, supplement your retirement income and more.

The loan is secured by the equity in your home, and assessed based on your assets and credit history, rather than your income or job situation – which makes the credit process quick and easy.

As with a traditional reverse mortgage you have the option to capitalise interest and make no interest repayments until the loan is repaid. We also offer a lifetime occupancy guarantee, if the security is the home you live in and there is no fixed term, as well as a no negative equity guarantee so you can never owe more than the value of your property.

Parental guarantee

With a parental guarantee, you don’t need to provide any cash up front. Typically, your home is given as security, in lieu of a 20% deposit on your child’s house. This means your child may avoid paying Lender’s Mortgage Insurance and get a lower interest rate.

However, since you are legally required to step in if your child doesn’t make repayments, the bank will look at your income and job situation in order to assess your ability to service the loan (just like in a conventional mortgage decision).

In the worst case scenario, your own home may be at risk. So, it’s important to limit the guarantee to the proportion of the deposit you are providing (and not the child’s whole loan).

Co-borrower loan

With a co-borrower loan, you and your child jointly take out a bank loan and share in the gain if the house goes up in value. However, you will have to prove you have enough income to service the whole loan, as you are responsible for making repayments if your child defaults.

In addition, your child may no longer be able to access the state-funded grants and stamp duty concessions available to first home buyers.

Standard Bank Loan

The simplest option is to take out a standard bank loan and pass these funds on to your child. Or, if there is already a mortgage on your home loan, you may be able to increase the loan amount.

The challenge for many older borrowers is that under current bank requirements you will need to show sufficient predictable income to meet the bank’s serviceability tests over the life of the loan, and your home remains at risk in the event that your child fails to pay you back or you are otherwise unable to service the loan.