Style: April 01, 2021

BANK OF
Every week in our auction rooms I get
to see a huge range of emotions playing
out. I’m often very moved by the drama
that a competitive process can create for
attendees and my heart goes out to them.
There are tears about missing a muchwanted
but very sought-after property,
there’s elation at successfully purchasing,
there’s a genuine pride at finally getting on
the property ladder and, for some parents,
there’s the realisation that without them
the purchase would not have been possible.
These are tears that I can definitely relate to.
It seems more and more parents are seeing
withdrawals from the trusty, rusty or even
crusty ‘Bank of Mum and Dad’ and as we
personally get a little bit nearer to that time
ourselves, I thought I’d take a closer look.
Obtaining funds from family is not a new
phenomenon, but it is a very important
one for some first-home buyers – and with
lofty deposits often required, it can involve
big numbers. It’s essential parents are
aware of this and that’s why we will often
see parents not just on auction day but
throughout the whole process, including
open home attendances, and second and
third visits. Being part of a very close family,
I imagine that I’d want to do this as well
and whilst some real estate professionals
struggle with large family viewings – and
even larger post-visit family debates – best
you get used to it!
During my research, I’ve also discovered that
providing funds is not as straightforward as
it once was.
Originally the main means of assisting
were, firstly, contributing to the deposit,
to a level the lender was happy with, and,
secondly, supplementing additional funds
to ensure the debt-servicing criteria were
met. It’s often referred to as a guarantee.
This second method needs to be carefully
thought through by parents, as a default by
their son or daughter (and much as we don’t
like to imagine it, this can happen) could
see them shouldering the responsibility
for the loan themselves. This can become
extremely uncomfortable, especially if they
have their own financial commitments
and pending retirement. To address this,
there have been changes to the legislation
deeming that any and all guarantors to
a loan need to demonstrate the ability
to meet the required loan payments to
avoid the worst from happening.
As much as we all love our families, if you
are considering helping in this particular
way it’s essential to get independent advice.
So, what are these purchasers buying?
It seems they are trying everything.
First-home buyers with limited budgets
are thinking outside the square and in
some cases the market is giving them a
robust education in looking at properties
that buyers might have had the luxury of
excluding in the past.
Varied locations, new subdivisions made
infinitely more desirable due to improved
motorway access, new schools and
communities, are all hugely popular.
We are also encountering parents looking
on behalf of overseas offspring with British
Pounds and American Dollars burning a
hole in their pockets and those budgets are
extraordinary when compared with what
was once considered necessary for making
a purchase in our local market.
So much of what we achieve as human
beings relates to how we have helped or
been helped by others, and I imagine one
day I’ll be in an auction room helping one
of our family members make a withdrawal
from the trusty bank of Mum and Dad too!
So, to all those parents in the same position,
well done, without you a whole generation
wouldn’t get to enjoy what we thought of as
a right – and that’s home ownership.
Lynette McFadden
Harcourts gold Business Owner
027 432 0447
lynette.mcfadden@harcourtsgold.co.nz
Whangaia ka tupu, ka puawai.
That which is nurtured, blossoms then grows.
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