Australians are preferring to stay with their parents to get their leg up the property ladder

Increase in Borrowing Capacity:

A lot of Australians are exploring the idea of living with their parents which in turn increases their borrowing capacity helping them to own their first property. A growing number of first property investors are first-home buyers only but are foregoing their dream of immediately moving into their own homes to keep their life expenses within the affordability net.

Stay-vesting v/s Rentvesting:

While most of the Australian Home owners prefer Rent-vesting, buying their first property in a less desired location while they continue to rent at a location of their choice which is usually close to their place of work along with access to life amenities like hospitals, educational institutions, etc. Stay-vesting further increases the borrowing capacity making it affordable and easier for first-home buyers to buy their dream home without burning a hole in their pocket.

However Stay-Vesting doesn’t come without its share of potential downsides:

Losing Benefits supported by Govt. backed schemes:

• Most of the benefits supported by govt. backed schemes can be availed by owner-occupiers only and therefore as an investor, you will potentially lose out on the benefits like:
• LMI waiver under FHG scheme
• Low upfront deposit up to just 5% of the property value
• Lose out on the concessions on stamp duty in certain states as well

Certain states are giving stamp duty concessions to investors as well, Victoria is one of them and has extended its stamp duty concession for investors by one full year. Read more about that article here.

➤Stay-vesting is usually a long-term strategy

• If buyers are thinking about moving into their home eventually they have to plan with the timing as this is usually a long-term strategy to buy your first home.

➤Understanding positively geared properties v/s negatively geared ones

• • Relative to investors first-home buyers usually have less information about the nature of property and whether it is in line with their long-term objectives
  • If you’re expecting the property price to increase in price you should consider all the potential factors that are crucial and would drive the growth.
  • Positively geared properties are usually more effective if you want to reduce your monthly expenses further and a steady cash flow from your investment as well but this would essentially mean that you won’t be able to move into your home in a short term as tenants usually want a lease which spans for at least 12 months or more.

➤Potential impact on personal relationships

• • Living with your parents might impact your relations with them and ultimately impact your personal life. It is essential to consider the short and long-term impact of living with your parents on your emotional makeup and personal life.

➤Stay-Vestors might face tougher screening from banks

• • Banks might not accept statements where the buyer is not paying any rent for current accommodation.
  • Essentially here Mortgage Brokers can help you navigate and buy the best mortgage solution that serves you specifically.

Potential Upsides of Stay-Vesting:

• Moving into the preferred area of choice eventually: Although potential upsides are many for the buyers who would want to purchase a property in the area of their choice later on they can exit their investment property pool with their existing savings and can move into the area that better serves their life needs.
• Building wealth through property: After buying their first property they can utilize the equities available within the first property and can start building a portfolio subsequently to build passive wealth through property and retire early.
• Moving in after improving cash flows and refinancing subsequently can help you manage your financial health better.

Stay-vesting can be a great tool to help potential first-home buyers get their first home off the block and keep their options open to building a sustainable property portfolio adding to their passive wealth in time to come.

If you find this article useful then you can check out our in-depth articles on our website.

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