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Assist family and friends to buy their own homes, says Tony Clarke
Even relatively affluent young people earning substantial salaries these days can find it very difficult to become home owners, says Tony Clarke, managing director of the Rawson Property Group.
"The first hurdle to overcome," says Clarke, "is to prove to the mortgage lenders that they, the applicants, are creditworthy - but often it is even more difficult for young people to raise the 10% to 20% deposit required and to find money to pay the transfer fees. This has proved an insurmountable barrier for many."
In previous times, says Clarke, it was accepted that parents, relatives or friends would often step into the breach and help young people to become home owners. However in today's more selfish and materialistic world, family ties have been weakened and this type of help is not given as readily as before.
Urging parents and relatives to seriously consider giving assistance to younger people, Clarke says that there are at least three avenues are open to them: they can lend the young person the cash for the deposit and the transfer costs - usually at a satisfactory interest rate - or they can sign on with the bank as joint owners and joint bond applicants. The banks, he says, are not averse to this type of agreement, as it has generally worked well for them. Alternatively, they can sign with the bank to stand surety for the loan (in all cases it is always a condition of the bank that value is found in the property).
Need not be risky
"Deals of this kind," says Clarke, "need not be risky because, firstly, the interest rate can be above average and, secondly, the agreement can include a clause which allows the lender or partner to take ownership of the property - often without compensation - if the borrower or partner defaults on his monthly payments. In these situations, the defaulter can sometimes become a tenant."
Clarke says that because renting can often give the young person a more prestigious home than buying, many opt for this. Nevertheless, he adds, it has been shown time and again that home ownership gives status, stability and motivation to young people and this should, therefore, be encouraged by his or her family and by any others who have their welfare at heart.
