Few buyers flush with parents’ money

Many first-time home buyers are grateful for help from “mom and dad’s bank,” but family loans may not be as prevalent as some people think.

The Productivity Commission on Tuesday released a wealth transfer report that also looked at how much money parents give their children and how it was spent.

After dividing wealth transfers into two classes – inheritance and gifts – he found that young people who do not own a home are more likely to receive money as a gift.

But these financial gifts were often minimal compared to the price of a house.

While the value of gifts had tripled since 2001, the current average was around $ 8,000 and the median donation was around $ 1,000.

These gifts were typically received by an adult around the age of 20, according to the report.

The results were based on data from the Melbourne Institute, probate systems and tax returns.

The authors of the report said there was almost certainly both underreporting and nonreporting of wealth transfers, so they looked at another way parents could help children buy a home.

These were parents guaranteeing loans, which does not always force them to part with their money.

Parental guarantees help borrowers avoid paying mortgage insurance from lenders, typically charged when the deposit is less than 20 percent of the purchase price.

The authors of the report used data from Commonwealth Bank and Westpac Parental Guarantee mortgage assistance.

The authors assumed that 3.5 percent of all loans in Australia are secured this way, based on the data.

If the average collateral is worth 20 percent of the loan, the total collateral value was about $ 13 billion.

This still represented a very small share of all loans settled each year, they said.

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