News & Advice Trending

property ladder

All parents want the best for their children, and that means helping them make responsible life choices and plan for a secure future.

One of the easiest ways to do this is to encourage sound, long term investments like property, but getting a foot onto that ladder can be daunting when you’re just starting out in the adult world.

“It definitely pays to become a property owner as early in life as possible,” says Bill Rawson, chairman of the Rawson Property Group, “but trying to get a bond on a starter salary – even in a high-paying career – can be difficult. A sectional title unit in a good area with good growth prospects can easily cost R1 million and more – that’s nearly R10 000 a month in bond payments, assuming you can secure a 100 percent loan, which is extremely rare these days.”

To qualify for a bond of that size, your child would need to be earning around R35,000 a month.

Needless to say, not many recent graduates have that many zeros on their payslip, but that doesn’t mean property is out of their reach – at least, not with a little help from you.

“There are two main ways parents can help their children become property owners at an earlier age,” says Rawson. “The first is to sign as surety for your child’s bond. This can help them qualify for a much larger bond than they otherwise would have been able to access, as their income will be added, but it does come with a lot of risk, which isn’t ideal.”

If high risk doesn’t thrill you, Rawson recommends the less risky option of a parent-to-child loan.

“A bond may be the cheapest type of formal financing available to most people, but that doesn’t mean it’s inexpensive – especially these days with interest rates on the rise,” says Rawson. “As a parent, if you have access to capital, loaning some money to your child to put towards a property at a lower interest rate can go a long way towards increasing the affordability of the investment.”

To illustrate his point, Rawson extrapolates from a hypothetical R1m property.

“With a 100 percent bond at 10.5 percent interest, repayments on a R1m home would currently be around R9,984 a month,” he says.

“If your child can immediately deposit R500,000 into the bond account, borrowed from you, those repayments drop to R4,991 a month. Of course, they’ll still need to pay you back, at around R3,300 a month assuming a 5 percent interest rate over the same length of time as the existing bond. In total, that means the payments add up to about R8,290 a month, or R1,692 less than they would have paid without your assistance. That can save them as much as R400,000 over the lifetime of the loan.”

To further protect yourself and your child, Rawson recommends drawing up a loan agreement allowing you to take over the property should your child fall into serious arrears on repayments.

“This gives you the opportunity to rescue the investment in an emergency, rather than see it repossessed by the bank,” he says.

On a related note, Rawson says that property can also be a great way to protect your child’s inheritance from reckless spending.

“Bequeathing a rental property to your children instead of money, and restricting the sale of that property for a set period, can be an ideal way to supplement their income without allowing them to squander the main bulk of capital,” he says.

“I’ve seen many cases where this kind of income has seen a reckless beneficiary safely through a difficult period when large amounts of cash would have only have fuelled their irresponsible behaviour.” 

This article “Time To Help The Children Get Onto The Property Ladder?” was issued by Rawson Property Group.

Shares 0

Leave a Reply

You might also like...

5 Signs It’s Time To Move Down The Property Ladder
6 First-Time Buyer Mistakes To Avoid
3 Ways to Save the SA Indebted Candidate Homebuyer
4 Tips On How To Avoid The Show House Blues
Comments: Budget on Economic Growth
Should You Ever Buy or Sell Property To a Friend or Relative?
New Generation Digs Now On The Rise
Western Cape House Prices Remain Steady
Investment hot spots – Waterfront and Clifton apartment prices hit historic highs despite economic lows
Sectional Title Scheme: NEW LEVY STRUCTURE Required!
South African Holiday Towns Now Underperforming Metros
Stronger Rand Makes South African Property Expensive For Foreign Buyers
Know The Risks Before Building Airbnb Castles In The Sky
Room Orientation And Natural Light: Beautify Your Space Naturally
What Will Residential Property Market Do In 2017?
4 Tips To Improve Your Home Value With These Holiday Maintenance Projects
Trump Win: What It Means For Real Estate In South Africa
How Millennials Are Changing The Real Estate Market
Making Your Property Work For You
Investment hot spots – Waterfront and Clifton apartment prices hit historic highs despite economic lows
First-Time Home Buyer Should Act Sooner Rather Than Later
Buyers in Cape Winelands Predominantly Gauteng Semigrants, Increasingly Europeans
South African Holiday Towns Now Underperforming Metros
Time To Make The Right Choice For Retirement Living
5 Ways To Maximise Your Credit Rating
Budget Tips For A Smooth Switch From Renting To Owning
Buy First And Cut Your Stress Level
How To Avoid Buyers Remorse
Occupational Rent And Your Rights
How Millennials Can Save For A Deposit
Conveyancing Fees: What Are You Paying For?
6 Steps To Prevent Property Transfer Delays
10 Steps To Choosing The Right Investment Property
How Do You Know You Are Ready To Buy?
Create Home Buyer Appeal Through Home Staging
Is There A Difference Between Offers?
How To Decide When To Sell
Does My Agent Care About Me Or Just The Commission?
3 Questions To Ask Before Listing Your Home
I Just Bought A Home – Now I’m Unexpectedly Being Transferred
What Is The Difference Between Value And Marketability?
Time To Stage Your Home When Selling
Get Higher Offers On Your Empty Home
When Is The Best Time To Sell A Property?
How Important Is Financial Fitness For Home Sellers?
Real Estate’s Dirty Little Secret And Why It’s Costing You Money!
5 Top Draw Cards For Millennial Buyers
4 Home Selling Misconceptions Debunked
Selling A Home With Pets
Is It Possible To Terminate A Lease Agreement Without Recourse?
New Generation Digs Now On The Rise
When Is Your Rent Due?
Gauteng Property Rental Market Forecasts Growth
Keeping Track of Parking On Common Property
How And When To Legally Evict Tenants
The Rental Housing Amendment Act: Waiting For Light In The Dark?
Tenants: Be Aware Of Ongoing Credit Checks
How To Rent With Pets
Is My Landlord Liable To Provide Security?
Why Are Property Inspections So Important?
Rental Property: To Furnish Or Not To Furnish?
Why Prevention Is Better Than Cure: Eviction Procedures For Landlords
Important Insurance Issues For Landlords
Stay In The Rental Market Or Buy?
5 Mistakes To Avoid When Relocating
7 Tips For Packing And Moving Quickly
Moving? Things To Think About!
Maximising Small Spaces
7 Tips To Help Your Children To Adapt To The Move
What To Do With Your Home When You Have To Relocate
Moving With Pets Can Be Tricky
Estate Agent Moving Tips
Telltale Signs You Need A New Home
Seven Signs You Need A New Nest
Über Wealthy On The Increase And On The Move
Comments: Budget on Economic Growth
Investment hot spots – Waterfront and Clifton apartment prices hit historic highs despite economic lows
First-Time Home Buyer Should Act Sooner Rather Than Later
Sectional Title Scheme: NEW LEVY STRUCTURE Required!
Buyers in Cape Winelands Predominantly Gauteng Semigrants, Increasingly Europeans
Dangers of Debt Consolidation Without A Plan
5 Biggest Downsides of Paying Off Your Bond
Push Into South African Real Estate Not Slowing Down
Problems Repaying Your Bond? Get The Banks In Your Corner!
How To Kill The Interest On Your Bond
Risk And The Role In Determining Insurance Premiums
Keeping Repo Rate Stable Makes Sound Economic Sense
Effects Of Higher Interest Rates On The Property Market?
How Will A Sub-Investment Status Impact The Property Market?
Is Property Still The Safest Investment In 2016?
Know The Risks Before Building Airbnb Castles In The Sky
Green Buildings Catching On In South Africa
Digital Disruption And The South African Commercial Real Estate Market
Can You Run A Business From A Sectional Title Home?
What’s Driving Change In The Commercial Property Sector?
5 Ways Commercial Property Space Planning Can Save You Money
Investing In Commercial Property an Attractive Option
3 Obvious Signs That It’s Time For Office Relocation
3 Things You Need To Know Before Buying Vacant Land
Price Correction In Commercial Property Market
South Africa: Evolution of Industrial Properties
The Commercial Times Are Changing
Healthy, Sustained Demand For Commercial Property
Incoming Inspections Are Vital For Rental Property
Which Factors Cause Property Values To Increase?