Last year I wrote about the fact that the ‘Bank of Mum and Dad’ has steadily risen to become Australia’s fifth biggest lender, with almost 30% of parents helping their children get into the property market. So in many respects it was sad to see an article last week in Domain which reports that family disputes over home lending are on the rise.
But there’s an important message in this too: Families need to get everything drawn up legally so it’s clear for everyone involved exactly how much was loaned, and when it is required to be paid back – whatever the terms are.
While families go into these agreements with the best of intentions and with their eyes wide open in many cases, life circumstances change, and they can change suddenly – something like an unexpected medical diagnosis for an older parent can mean they need urgent access to funds, and this is when things can get complicated, especially if the recipient of the loan is not in a position to pay it back.
Whether you’re buying property with a loan from your parents, or with other family members or friends, even a spouse, it pays to stay practical and grounded, and look at all potential scenarios and options, and to plan exit strategies in case something goes wrong.
If you’d like to discuss your options further, give us a call on 02 9518 5728.