THE BANK OF MUM & DAD: FOUR WAYS TO HELP YOUR CHILDREN ONTO THE PROPERTY LADDER

It’s getting harder and harder for people to get onto the property ladder. As a parent, when you see your child struggling to get on the first rung, you’ll naturally want to help.

Even at the average price of property in the UK – approaching £300,000 – and even with a 95% mortgage, that still leaves your children needing £15,000 as a deposit, plus Stamp Duty, legal fees and moving costs.

If they want a better interest rate, or if they want to buy a more expensive home, it doesn’t take much to see the difficulties they face. Even with mortgages of 4.5x someone’s salary and longer-term loans, the upfront costs are still a barrier for many buyers.

As affordability has shrunk, The Bank of Mum & Dad has grown, with parents stepping in wherever they can. So, let’s take a look at some of the ways you can help your child buy a home and support their property progress.

Remember: everyone’s status is different, and every lender has its particular criteria, so do get in touch on 01174039430 or hello@wrethical.com for some expert and tailored advice for your circumstances.

PUT YOUR CHILD’S RENT INTO SAVINGS

If your children are still living with you at home, you could help them save for a deposit by putting some or all of the rent they pay you into a savings account.

As well as growing into a tidy sum, having a regular amount going out of their account will get them used to monthly expenditure and everyday commitments, which can come as a surprise when first leaving home.

It may be worth asking your children how confident they are in leaving the money alone. If they’re unsure, you might agree to open the account in your name, or at least for you to keep the access details.

Watching their deposit grow can be a real motivator and may even inspire your child to add some extra each month as the possibility of owning their own home gets nearer and nearer.

BUY THE PROPERTY TOGETHER

If your child doesn’t yet earn enough to get a mortgage on the home they want, and you have enough income to make up the shortfall, buying the property together could be the answer.

Even on a joint mortgage with a first-time buyer, buying a second home usually attracts an extra 3% Stamp Duty. You can also be liable for Capital Gains Tax if you’re still an owner when the property is sold.

The solution lies in a Joint Borrower Sole Proprietor Mortgage. Here, a lender takes into account the income of you and your child, but your child is registered as the sole owner on the title deeds. This means the property is no longer seen as a second home, so the additional taxes no longer apply.

Some lenders are starting to be pretty innovative about how this is done, and there are even specialists who allow you to register a percentage stake in the property, which can vary over time, if you choose to pay more in, or your children give you some money back.

Remember that if payments fall behind on a joint mortgage, both your credit ratings will be affected. It’s essential to have an agreement that, if either of you ever runs into difficulties, you’ll talk to each other straight away before the mortgage falls into default.

GET A UNIVERSITY MORTGAGE

Most students see homeownership as a distant possibility and certainly not something they’re likely to achieve while still at university. But there’s a mortgage that allows them to own their own home and earn an income from renting out rooms while they study.

A University Mortgage (also known as a Student Mortgage) is loaned on a Joint Borrower Sole Proprietor basis, meaning your child will be the sole owner on the deeds to avoid the extra Stamp Duty and Capital Gains Tax liabilities of second homes.

Lenders assess the potential rental income of the property, as well as any parental income, and the property must be near your child’s university.

Parents are required to offer security, and this can be in the form of equity in a property, depositing funds into a locked account, or a combination of both.

So your child can choose who they live with, discover the responsibilities of homeownership and even learn what it’s like to be a landlord, all while being a student! Quite a head start on life.

GIFT YOUR CHILD THE DEPOSIT

It’s possible that your child earns enough to get a mortgage but doesn’t have the money for the deposit. And saving up can be a hamster wheel of difficulty if they’re paying rent every month.

A University Mortgage (also known as a Student Mortgage) is loaned on a Joint Borrower Sole Proprietor basis, meaning your child will be the sole owner on the deeds to avoid the extra Stamp Duty and Capital Gains Tax liabilities of second homes.

Lenders assess the potential rental income of the property, as well as any parental income, and the property must be near your child’s university.

Parents are required to offer security, and this can be in the form of equity in a property, depositing funds into a locked account, or a combination of both.

So your child can choose who they live with, discover the responsibilities of homeownership and even learn what it’s like to be a landlord, all while being a student! Quite a head start on life.

GIFT YOUR CHILD THE DEPOSIT

It’s possible that your child earns enough to get a mortgage but doesn’t have the money for the deposit. And saving up can be a hamster wheel of difficulty if they’re paying rent every month.