Money Basics for Tough Times by David Koch

Author:David Koch
Language: eng
Format: epub
Publisher: Pan Macmillan Australia
Published: 2020-09-23T03:08:06+00:00

Speed up deposit saving

Shop around for the savings accounts with the best interest rates.

Earn extra income through a second job or home business (see Chapters 4 and 9).

Implement a strict spending budget.

Have your savings debited at the start of your pay period and live on the remainder.

Ask relatives for help or to act as guarantor (see later in this chapter).

Three ways to convince your folks to help you buy property

First home buyers are scrambling like buffaloes over a croc-filled river to secure their own home. Unfortunately for most, the struggle to gain traction on the sheer, riverbank-like deposit is holding them back from coming out the other side.

There is, however, a ferry that crosses the river, and it’s driven by your parents.

If your folks own their own home, and you can get them on the hook as guarantors, the bank manager will be only too happy to sell you a ticket to ride. That’s because they can get your parents to fork out in your place if you hit the skids and start missing repayments. Hell, they’ll even be able to sell your parents’ house to get the money back if they need to.

But that makes it all sound a bit morbid. Guaranteeing a loan only gets that heavy if you stuff things up, and even then it’s possible to limit the amount your parents will be made to pay. You see, you can arrange for a guarantor to secure as much, or as little, of the loan as they like.

Usually you’ll be after a guarantee for at least 20 per cent so that you can avoid paying lenders mortgage insurance. Once this amount has been paid off the loan capital and you have that equity in the property, your parents’ guarantee can be discharged and they’ll be free to keep spending your inheritance.

And if you think your folks’ wallets are a bit too skinny to go guarantor on a loan, keep in mind they just need to put down assets, like a property, as security, not wads of cash. While everyone’s situation is different, many parental couples have the assets to get you over the croc-infested waters. You just need to fit them with a captain’s hat. Here’s how.

1. Make a smart pitch

You’ve got to present a worthwhile case for your parents to put their own property at risk, so get your pitch prepared before asking the big question of them.

At the heart of every convincing argument is a good plan, in this case, a business plan. So get to work and fill it with research on the pros and cons of property investment, the expected returns you’ll earn and a budget to show how exactly you’re going to afford the loan repayments. Backed up by a good business plan, you’ll be in a great position to make a slick pitch and to field any prickly questions they have about the arrangement.

Take it seriously, be thorough and keep it professional. No whingeing.

2. Treat it as a

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