Are you relying on an inheritance to buy your first home?

A recent survey has found that people relying on and using an inheritance to buy their first homes has increased. As the property market continues to increase, making buying a home unaffordable for younger generations, it’s unsurprising that young people are waiting for a parent to pass away before buying their first home. In the survey, around 26% of people aged 16-35 (Generation Y) said they are relying on their parent’s assets. This is a big increase on previous generations: Generation X was 16% and for the Baby Boomers it was only 8%.

inheritance, contesting a will, buying a house, housing affordability, groom and laversIt may seem like the perfect solution to the housing affordability issue, but relying on an inheritance can lead to an increase in family disputes. What is increasingly occurring is children counting on an inheritance from their family to give them the deposit they need to break into the market. However, some people count their chickens before they’ve hatched and don’t get as much as they were expecting, while some even ask for an early inheritance.

First Home Buyers of Australia founder Daniel Cohen says inheritances are now becoming a firm factor in first-time buyers’ calculations, although a major difficulty is that, while some will be bequeathed six, even seven-figure sums, others may receive nothing.

“First home buyers are looking at both pre-inheritance and after-death inheritance, and that’s a trend that might well grow, especially for raising deposits,” Mr Cohen says. “But the problem is, you can’t count on that money.

“Baby Boomers have long life expectancies these days and while some want to pass on their wealth, others don’t want to. They say they’ve worked for that money, it’s theirs and they want a good retirement.”

Disputes arise when children ask their parents to “Give us the money!” as an early inheritance, sometimes creating tensions that end up seeing them cut out of wills completely, or their share slashed. After their parents’ death, they’re also increasingly challenging siblings and other family members for a bigger slice of the pie.

How Not To Rely on Your Inheritance inheritance, contesting a will, buying a house, housing affordability, groom and lavers

The key to having a deposit for buying a house is saving. This has always been the case, but housing affordability means that the deposit first home buyers have to come up with is much larger than even ten years ago. Saving for your own home may actually require less time than if you were awaiting for a family member to pass away. Compiled below are tips that everyone should follow if wanting to break away from the stage of renting.

First, consider your budget. When doing this, you may realise there are many things you can sacrifice in order to save more money. The key to working out a budget is compiling your expenses. These include groceries, fuel, rent and even payments on debt. Consider items you can do away with – take your lunch to work, delete your Netflix account or whatever helps you put more funds in your savings account.

Second, re-analyse your debts. You may be relying heavily on a credit card with astronomical interest rates, which could be negatively impacting your finances. Do you really need a credit card or could you make do with a debit card? Begin taking steps to become debt free. To do this, you may need to contact your bank or begin seek advice from a financial counsellor about how to get your debts under control.

Find what banking method suits you best. This may mean opening a separate account to transfer money into or changing banks that have better interests rates on savings accounts. Bank accounts may actually charge you for having an account, so do some research and find what bank meets your needs at the best price.

Basic tips for saving also include:

  • Start saving as soon as possible. Every little bit will count in the end.
  • Look for houses in your ideal price range and save up an average of 20% of the price, as banks will most likely accept this amount. This also means you won’t need to borrow as much.
  • Keep track of your saving; banks will take this into account when you wish to take out a loan.
  • Pay off your other debts and begin working hard to become debt free.
  • Make sacrifices; what money are you spending that you don’t have to be?

After you begin the process of saving and are thinking of buying a house, it is also important that you seek legal advice. We can help you with conveyancing, as well as updating your estate planning to reflect your new asset. If you’ve been waiting for an inheritance and have been cut out of a will or have received less than you were promised, we can help you to contest the will. Strict time limits apply – so make sure you obtain legal advice.

Contact our friendly team today.