A loan from Mum and Dad makes a rural property a reality for a young Canterbury couple.
Verna and Murray Woods believe in paying it forward. When the semi-retired Ashburton couple bought their first home in 1976, Murray’s parents chipped in $2000 for the $21,000 Christchurch house.
Fast forward 40-something years and they recently did the same for their daughter, Rachael, 32. This time around, the numbers look a little different.
“We gave Rachael and her partner, Jonny, $150,000 as an interest-free loan so they could buy a $936,000 rural property to start their dream of sheep and beef farming,” says Verna, who’s 63.
The bulk of the couple’s loan for the 15ha property came from a 30-year mortgage.
“We covered the deposit from the sale of our previous home,” says Rachael, an office and compliance manager and company director. “But because of the size and cost of this property, we needed help. We asked Mum and Dad for just enough to make the bank happy to give us the loan.”
The Bomad loan, which was legally documented, is repayable only when the house is sold, although Rachael insists she and her agricultural mechanic partner intend to pay back her parents “as much as we can whenever we have surplus cash over the next few years”.
It’s the third property the young couple has owned and Verna says that’s part of the reason she and her husband had no issues with lending them the money. “Rachael and Jonny have an amazing work ethic and their money management is impressive. We knew how much they wanted to get into farming and they’d work really hard at it. We definitely wouldn’t have lent them the money if we’d had any reservations.”
Verna and Murray, who 18 months ago up-sized to a 2ha lifestyle block, say despite their retirement savings taking a hit, it doesn’t keep them up at night. “Our money has been invested in property, which has proven to be a good investment over time. Of course, we live in hope the kids will make lots of money and start paying us back when they can.”
This story is part of the article The risks of opening an account with the bank of mum and dad.