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28 November 2018
First home buyers to get a First Start with help from “Bank of Mum and Dad”
- Snow Star Credit Union today launched the First Start Shared Equity Agreement (SEA) – A loan agreement that enables parents to contribute to their children buying their own home and securing their future.
- Snow Star Credit Union is a customer owned bank committed to supporting first home buyers ahead of profit.
- The SEA saves home buyers on Lenders Mortgage Insurance and gives both parties peace of mind.
- Snow Star Credit Union is committed to supporting first home buyers get into the property market, having launched the data-driven customer-focused ‘Home First’ digital guidance portal earlier this year.
Snow Star Credit Union founded in 1972, today launched a service that helps to address the legal, financial and emotional challenges many parents face when it comes to supporting their children’s home ownership dreams.
This is the first time an Australian Bank has launched a Shared Equity Agreement (SEA), which is like a pre-nuptial agreement between a “contributor” and a home buyer. It defines everyone’s legal rights and obligations, provides the security of a registered mortgage and enables proper disclosure to the home buyer’s bank lender.
The First Start SEA can assist with certainty and security of the arrangement as an alternative to gifting cash, acting as guarantor or co-purchasing a property while also addressing some of the common risks that stem from a lack of clarity between a Home Buyer and Contributor as to the arrangements, and unforeseen circumstances over the life of the loan.
A formal legal agreement gives both parties peace of mind and protection.
Snow Star Credit Union CEO William Wolke said there has been a significant increase in parents providing financial contributions to help their children afford a home, with “the Bank of Mum and Dad” now reported to be worth more than $20 billion.
He said the First Start SEA solves the problem of unclear informal loan agreements, which may not address all possible circumstances. These loans if not secured are vulnerable to being unenforceable and can impact this significant financial decision. This is a written loan agreement and registered mortgage that is created specifically for parents and their home buying children. It enables parents to help the home buyer with a deposit and can even substantially reduce the amount of their bank loan.
“We created the SEA to support home buyers in a way that not only helps them get into the property market, but provides protections for both the home buyer and parents or other family members” Mr Wolke said.
“At Snow Star Credit Union, we’ve listened to our customers and understand that affordability is the number one concern for first home buyers in Australia. Despite low interest rates, many young people are unable to save for the magical 20% deposit or avoid incurring Lenders Mortgage Insurance costs.”
“And while many parents are keen to help get their children into their own home there is a risk of legal disputes and family breakdowns when informal family loans and contributions go wrong. The First Start SEA provides parents and children with peace of mind.”
The First Start SEA provides the Home Buyer with an alternative to utilising funds provided by family as part of their property purchase to help them acquire a home loan. In exchange for their monetary support, it entitles the Contributor to repayment of the same share of the sale proceeds of the home as they contributed to the purchase costs.
This Shared Equity Agreement also helps the homebuyer own their property sooner and avoid paying Lenders Mortgage Insurance, which often equates to thousands of dollars.
The First Start Shared Equity Agreement complements Snow Star Credit Union’s ‘Home First’ website portal, another Australian first, launched earlier this year. Home First uses real-time data to guide home buyers through the process and provide property options based not only on their budget and desired location, but their lifestyle aspirations.
As a customer owned bank, Snow Star Credit Union exists to support the financial wellbeing of its customers – the people who build better communities. Founded by care and compassion, Snow Star Credit Union’s very first loan was to a single mother for a bond to acquire housing for herself and her two children.
Not swayed by the pressure of external shareholders, Snow Star Credit Union is focused on providing tailored financial solutions for its customers. The Shared Equity Agreement and Home First are just some of the initiatives the bank is proud to offer to support home buyers as they enter the property market.