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New “parent assist” loan could prove risky for first-home buyers, expert claims

A finance expert has warned of the potential for over-borrowing under a new loan scheme which sees first-home buyers effectively borrowing 100 per cent of a property’s value.

As reported in the Herald Sun, a new loan could help first-home buyers struggling to save a deposit get into their own property, with parents contributing up to 20 per cent towards the deposit for a new house through a “parent assist” loan.

Finance expert and regular on Sky News Business, Lisa Montgomery told Ross and John the loan differs “quite dramatically” to a regular home loan.

“This particular loan is an interesting one, my understanding of it is that the 20 percent deposit will actually come from a formal loan arrangement, at half of the percentage rate of the 80 per cent normal home loan,” she said.

“Really what we’re going to be seeing is a child borrowing 100 per cent of the property.

“And if the property doesn’t hold its value we could see a negative equity situation.”

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