Jeremy Tauri: Advice for parents

Jeremy Tauri.

If you're a parent, it's only natural to want to help your kids out.

At the moment, lots of parents are in a tricky position. Rising house prices mean they have built up a lot of equity in their properties, and at the same time their kids are finding it harder to crack the property market.

That makes it very tempting to want to offer some help.

If your kids have decided 2016 is the year they want to get into their own homes, there are some things you should know before you offer a helping hand.

It has become common for parents to go guarantor for their kids' home loans. This means their property is put up as security to satisfy bank equity requirements.

The important thing to note if you are considering this course of action is that the guarantee needs to be limited to only the shortfall in equity required, for example 10 per cent of the house's value.

It is important that the guarantee isn't open-ended because not only could you end up liable for the whole home loan, you could end up taking on the borrowers' other debt as well.

You could also offer money for a deposit as a gift, although it could be a good idea to have the buyers draw up a relationship property agreement if you do not want the money to be lost if the couple splits.

Other options include taking a stake in the property that can be sold back to your kids at a later date and - for the really generous, buying a property in the kids' names for them to sell when they are ready to buy their own place.

Whatever you do, it's important to get your agreements in writing.

Houses can be emotional investments and while you can probably trust your kids to do the right thing, you may find they end up in a relationship with someone about whom you know a lot less.

Jeremy Tauri is an associate at Plus Chartered Accountants.