PROPERTY

Ask Paul: My parents expect me to buy them a house

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Dear Paul,

My parents have never been able to afford to buy a home.

Now that I am working full-time, they suggested I buy a house for the family. They would give me some money to help with a deposit and said they will help me pay the mortgage.

Ask Paul My parents are pressuring me to buy the family a house

But they both receive pensions, and I know money is tight. 

I love my family, and my parents deserve a home of their own, but the idea of taking on a big mortgage on my own (because it does feel like I would be on my own) terrifies me. - Chai Li

Goodness Chai Li, here you are between a rock and a hard place. No matter how much you love your parents, and they love you, you are quite correct, the liability of a big mortgage falls on you.

But there is also an upside here. Your parents will be paying rent and that amount could go to you to support the mortgage. Their contribution to the deposit will also be a big help in getting you into the market.

You can quite easily do your own numbers around what you can afford in repayments, plus your parents' help.

A real challenge is what do your parents do if they need to go into care?

All their capital may be tied up in the home and their pension supporting the mortgage. I am equally concerned that your role in time to come may be one of near full-time carer as they grow old. That will not fit with a full-time job to make mortgage repayments.

Fortunately, you are a long way from making a decision on this. The key is the actual numbers, which I can appreciate you don't want published in a magazine.

Your decision depends upon your salary, your savings, your parents' savings, how much of their pension they could use to help with the mortgage, the long-term care of your parents and, of course, how much you will need to pay for a suitable house.

I think doing these numbers with your parents will lead you to the solution. Of course, there is also the very significant issue of whether you want to spend possibly many decades living with Dad and Mum. 
I wish I could be more definite for you.

It is tricky and I am a bit terrified for you as well, but I am hoping that after an open conversation once you have all your numbers - what a bank will lend you and so on - your decision becomes clearer.

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Paul Clitheroe AM is the founder of Money and serves as the publication's editorial adviser. One of Australia's most trusted personal finance experts, Paul has spent decades helping Australians build wealth, manage debt and make smarter money decisions. He is widely known for host­ing the Money TV program and authoring best-selling personal finance books. Since launching Money in 1999, he has played a leading role in delivering practical, independent financial guidance to Australians. Paul is chair of InvestSMART Financial Services. He was the founding chair of Ecstra Foundation, a national not-for-profit focused on improving financial wellbeing, from 2018 to 2026, and led the Australian Government's Financial Literacy Board and Financial Literacy Australia from 2004 to 2019. In academia, Paul is chair in financial literacy at Macquarie University, where he is also a Professor in the School of Business and Economics. Ask Paul your money question. Due to volume, Paul cannot respond to questions posted in the comments section.