The Barefoot Investor has exposed the disadvantages of first home buyers relying on the Bank of Mum and Dad to purchase a property.
Scott Pape raised the alarm after concerned reader Bindi wrote to him explaining that she and her partner, both in their 20s, were struggling with their mortgage.
“After living with my parents for three years and two children later, we find it difficult,” she wrote.
‘Our mortgage is just under 60 per cent of our income, so I don’t know how I can get our expenses below 60 per cent.
‘We both work full time and our children are in nursery. My husband is an apprentice plumber and I work in the public service.
“Try to get cash work, but the competition is tough.” I’m just not sure how we’ll be able to survive considering we only got our mortgage three months ago, so refinancing isn’t really an option.
Pape responded that he assumed the couple had relied on a donation from the Bank of Mom and Dad to secure the deposit on the house.
“Because you wouldn’t have done it on your own,” he said.
The Barefoot Investor warned young couples not to push themselves beyond their means
“In that case, you serve as the ‘after’ mugshot of what happens when you give alms to children disguised as help.”
He wondered if the couple had accepted their parents’ loan without considering whether they could comfortably cover the mortgage payments themselves.
“You are parents now, so it’s time to behave like responsible adults,” he wrote.
investigation of Finder.com.au shows that around 60 per cent of first home buyers in Australia receive some form of parental assistance in purchasing their first home.
It also suggested that more than half of children who borrowed money from their parents are under financial stress.
Only about 28 percent of those who didn’t are equally stressed.
The Barefoot Investor suggested the young couple call their bank and report their difficulties.
He said it could allow them to move to interest-only payments for a short time until Bindi’s husband finishes his apprenticeship.
Until then, he suggested, the couple should feel comfortable living well below their means.
“Until then, enjoy the baked beans, shop for Santa on Gumtree and sell as much as you can to get at least $2,000 Mojo in the kitty,” Pape wrote.
‘You will overcome this and it will make you stronger and wiser. Promise.’
Many Australians are feeling the squeeze as house prices have soared across the country, while interest rates have remained high at an official rate of 4.35 per cent.
To comfortably own a median-priced home, Sydneysiders would need to earn a salary of around $238,000 a year, recent estimates show.
Those in Perth, Adelaide and Melbourne would need more than $150,000 a year.
Residents of Brisbane and Canberra would have to earn just over $175,000.
Finder data shows parents are gifting their children $33,278 on average to help with deposits in the competitive market.
About seven per cent of Australian parents continue to contribute to their children’s mortgages.