The Bank of Mum and Dad

Discussion in 'Starting & Running a Business' started by MTR, 13th Nov, 2017.

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  1. MTR

    MTR Well-Known Member

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    According to the AFR, they have a $16 billion dollar stake in the Australian mortgage market.

    'Bank of Mum and Dad' is now Australia's fifth largest mortgage lender

    “Bank of Mum and Dad… is estimated to have lent about $16 billion…

    Cash flow Capital....comments on this....


    A few weeks back they released a report that said that first home buyers that receive financial assistance from their parents when they purchase a home are twice as likely to encounter financial stress down the track:

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    “…a rising though still small share of FHBs are receiving financial assistance from family and friends (Figure 11). It is possible that FHBs who have received help to meet the deposit requirement have less financial discipline than FHBs who have saved the entire sum independently…”

    [​IMG]

    I think they have the causality all backwards. They’re saying that kids with poor financial discipline are hitting up their parents, and because of that poor financial discipline are liable to fall into financial stress.

    Poor millennials. They cop it from everybody.

    But isn’t it more likely that the people who are going to their parents are doing so because they’re looking at buying an expensive place with a huge mortgage.

    And show me anywhere in Sydney and Melbourne where you can buy a family home without a huge mortgage.

    And so if you don’t have to go to Bank of Mum and Dad, it probably means that financially, you’re probably already pretty sorted.

    It should be more surprising that these borrowers run into financial hardship than the BoM&D customers.

    So don’t blame the kids. This isn’t their fault. They don’t “lack financial discipline”. It’s just what happens when the property market booms and then booms and then booms some more.

    Are you helping your kids into property?
     
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  2. jaybean

    jaybean Well-Known Member

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    It's one of the only banks in the world that is utterly delusional about their chances of getting their money back:)
     
    Last edited: 13th Nov, 2017
  3. Sackie

    Sackie Well-Known Member

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    I had to not only pay them back ( in a short time frame) but with interest...o_O

    Dad's famous line, 'no free lunches in life son'.
     
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  4. jaybean

    jaybean Well-Known Member

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    Not many parents have the backbone to raise kids like that. Good on em.
     
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  5. Sackie

    Sackie Well-Known Member

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    Eternally grateful i am.
     
  6. Kassy

    Kassy Well-Known Member

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    Snap @Leo2413!

    I’m genX so this is not a new problem. When I bought my first property I had factored all costs except stamp duty. Dad leant it to me and it came out of my pay + interest. My first Property was an IP, I still lived at home with dad and also continued to pay board.

    *no first home buyers anything back then or stamp duty discounts...
     
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  7. Sackie

    Sackie Well-Known Member

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    Aren't old school parents da bomb:)
     
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  8. Kassy

    Kassy Well-Known Member

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    Wish I had listened to mine earlier...
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    How would they source the data for these numbers?
     
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  10. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    A very long time ago I approached the bank of Mum & Dad when we were $5k short on our first home.

    I was very quickly reminded that in my case, there's numerous, "Terms and Conditions", that whilst unwritten, are fully enforceable long after the loan has been closed. They're quite difficult to adhere too as well. In my case it wasn't worth the cost for $5k.

    On the other hand my brother is a shrewd negotiator. He managed to secure a loan for $100k with the only stipulation(at his suggestion) that he'd, "Go to church". Whilst he did pay the loan in full a few years later, I don't believe he ever made good on that condition.
     
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  11. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    I believe it is "The Millionaire Next Door" goes into stats and psychology behind this. American based but likely similar or worse here.

    Children can get used to handouts so hand them out sparingly, if at all!
     
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  12. jaybean

    jaybean Well-Known Member

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    Well when the rapture comes he won’t be laughing so much anymore. Eat up while he can, smashed avacados are not served in hell.
     
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  13. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    He would have saved 10% as well :p
     
  14. MTR

    MTR Well-Known Member

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    Very funny, good on him.... so he is a believer .... in the M&D bank
     
  15. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Dont we all wish Westpac had such conditions to avoid LMI
     
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  16. Ross Forrester

    Ross Forrester Well-Known Member

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    If your Mum and Dad are getting 2.4% on the money they lend to the bank and the same bank is charging you 4.1% for the same money they lend to you - doesn’t it make sense to help out Mum and Dad?

    This can work to help out parents and kids. Smart parents give a hand up not a hand out. And families look out for one another. It is what they do.

    If a parent is wealthy - simply refusing to not assist a child while they are alive - on the grounds that this is teaching the 52 year old child a “good lesson” is stupidity.

    Every child with wealthy parents, at some stage, factors in a potential inheritance it is large.
     
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  17. Xenia

    Xenia Well-Known Member

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    Every time my kids open their mouth to speak it costs me another $100
    I have a birthday party this weekend
    My shoes are too small
    I need a different coloured leotard for ballet

    Omg .....
     
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  18. Angel

    Angel Well-Known Member

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    Open their mouths - they will be getting braces on their teeth soon.
     
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  19. Gockie

    Gockie Life is good ☺️ Premium Member

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    This could work.

    I'm eight years old and already own a four-bedroom home in Melbourne. This is how I became Australia's youngest property investor - and the secrets I learned from my savvy dad | Daily Mail Online

    2 comments from me:
    1. FHB rules in many states won't be impacted AFAIK as these properties would be investment only, so the kids can buy later and still get FHB benefits.

    2. I don't think you can find neutrally geared IPs in cities (excluding properties like studios but they aren't good investments)
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This doesn't make grammatical sense.

    What bank lends to minor children? It could only be a related party lender
     
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