Insights

For many parents, one of the greatest financial milestones is helping their children take the first step into property ownership. With property prices remaining high and deposits a major hurdle, family support can make all the difference.

The Federal Government, through Housing Australia, have implemented the Home Guarantee Scheme to help first home buyers get into the property market by eliminating the financial burden of Lender’s Mortgage Insurance (LMI). Understanding how this program works is crucial if you want to provide support while ensuring your children can still access the concessions available.

LMI Concessions – What’s Changed?

Traditionally, first home buyers with less than a 20% deposit were required to pay LMI, a cost that can add tens of thousands of dollars to their purchase.

The Home Guarantee Scheme allows some lenders the ability to offer LMI concessions for eligible first home buyers, allowing them to borrow with smaller deposits (5% in most circumstances, 2% in limited circumstances) while avoiding LMI. However, the eligibility criteria are strict, and external financial support needs to be structured carefully to ensure these concessions aren’t lost.

What Parents Can Do

Parents can provide assistance in ways that complement these concessions:

• Gifted Funds: A non-repayable cash gift towards the deposit to help reach the relevant minimum deposit. Note that there may be income tax considerations for the child on earnings from these funds once received, if there is a significant lead time between the gifting and the ultimate purchase.

• Guarantor Support: Some lenders allow parents to act as guarantors, using their own property as additional security – though this carries risks and should be carefully considered.

• Covering Costs: Helping with upfront expenses such as stamp duty, legal fees, or moving costs can relieve the financial burden without interfering with deposit requirements.

What Parents Can’t Do (to Preserve Concessions)

Certain forms of assistance may disqualify your child from LMI concessions:

• Loans or Private Lending Arrangements: If money is advanced as a loan (even informally), lenders may not consider it genuine savings, potentially voiding concessions and/or reducing the lending capacity of the child.

• Distribute large sums to children prior to their purchase from family investment structures: The concession requires the taxable income of the child in the year prior to purchase to be below either $125,000 (individual purchaser) or a combined $200,000 (joint purchasers). Exceeding this limit excludes the concession entirely.

• Joint Ownership with Parents: Purchasing the property in your own name alongside your child typically disqualifies the purchase from any first home buyer and LMI benefits. This is also a consideration in joint purchases where one purchaser has owned a property in Australia within the last 10 years.

• Overbearing Involvement: Lenders assess independence and serviceability. If the application suggests the parent, rather than the child, is the primary purchaser, concessions may be withdrawn.

Helping your children buy their first home is a generous and rewarding milestone – but it needs to be done in a way that doesn’t unintentionally cost them thousands in lost concessions. With the recent LMI changes, structuring the support correctly has never been more important.

At Altitude, we regularly work with financially secure families to structure first home purchases effectively – balancing assistance with long-term wealth planning.

If you’re considering helping your children buy their first home, now is the perfect time to seek advice. Get in touch with us to explore the most effective and tax-smart strategies tailored to your family.