Supporting Your Children in Climbing the Property Ladder: a Comprehensive Blog for Parents and Grandparents

Written on 9 March 2025 by Nicholas Mendes

parents with child on sofa surrounded by moving boxes

Helping your children or grandchildren secure their first home is a dream for many families, but with rising property prices and stringent mortgage requirements, it can feel like an uphill battle. As a parent or grandparent, there are numerous ways you can provide financial support, guidance, and strategic advice to make this transition smoother. Understanding the options available will allow you to take a structured and informed approach, ensuring that your assistance benefits both you and your loved ones in the long run.

Understanding the Housing Market and Financial Planning

Before making any financial commitments, it's essential to assess the housing market in the area where your child or grandchild is looking to buy. Prices can vary significantly by region, and understanding what they can afford will help you gauge how much support they might need. Websites such as Rightmove and Zoopla provide valuable insights into current market trends, making it easier to plan ahead.

One of the most helpful things you can do is sit down with them to review their financial situation. Many first-time buyers struggle to save for a deposit due to the increasing cost of living, so identifying areas where they can cut expenses and boost their savings rate is a crucial first step. Encouraging them to set up a budgeting plan or even contributing to a dedicated savings account can make a substantial difference over time.

How to Help Get Your Child on the Property Ladder

There are several ways to assist your child in securing their first home, ranging from direct financial contributions to strategic mortgage support.

One of the most effective ways to boost their deposit savings is through a Lifetime ISA (LISA). If your child is under 40, they can save up to £4,000 per year, and the government will add a 25% bonus (up to £1,000 annually). This tax-free savings scheme can be a game changer, especially when started early, as it helps build funds specifically for purchasing a first home up to £450,000.

For those in a position to do so, gifting a deposit is another option. Providing a lump sum towards the deposit can significantly reduce the mortgage’s loan-to-value (LTV) ratio, often leading to better interest rates and more manageable repayments. However, it’s essential to consider the implications for inheritance tax, particularly if you are giving large sums. Consulting a financial adviser can help structure this gift in the most tax-efficient way.

If outright gifting isn’t an option, family offset mortgages offer a practical alternative. Instead of handing over cash, you can place your savings into an account linked to your child’s mortgage. The balance acts as an offset, reducing the interest they pay on their loan. The benefit of this arrangement is that your savings remain intact while still helping your child reduce their mortgage costs.

Another option is joint borrower sole proprietor mortgages, which enable you to help your child secure a mortgage without being listed as a co-owner of the property. This type of mortgage allows parents or grandparents to have their income included in the mortgage affordability assessment, increasing borrowing capacity while ensuring the property remains solely in the child’s name. This can be particularly helpful for first-time buyers who may not meet affordability criteria on their own.

For those with significant home equity, equity release is another avenue. This allows parents or grandparents to unlock cash from their home to support their child’s purchase. While this can be a great way to provide financial help without dipping into savings, it’s crucial to understand the long-term impact, particularly regarding interest accrual and inheritance planning.

Using Property or Savings as Security

If you’d prefer not to gift cash directly or take out an equity release loan, there are still ways to provide financial backing without outright giving away funds. Family deposit mortgages allow you to use the equity in your own home as security for your child’s mortgage, either by providing a deposit from your own funds or by securing a charge against your property. This means you’re able to help without liquidating your assets, though it does carry some level of financial risk if your child defaults on the mortgage.

For those who want to contribute financially but retain flexibility, family-assisted mortgage products can also provide a solution. These schemes vary by lender but often involve keeping savings in a linked account as security, helping reduce the mortgage risk while allowing you to retain access to your funds after a set period.

Choosing the Right Approach

Deciding on the best way to support your child’s home purchase requires careful thought. It’s important to ensure that any assistance you provide doesn’t put your own financial stability at risk, particularly if you are nearing retirement. Open discussions about expectations, responsibilities, and financial implications are key to avoiding potential misunderstandings in the future.

It’s also crucial to consider the long-term financial impact of any support. Will your contribution affect your tax liabilities? Could it impact your ability to borrow in the future? Are you comfortable with the level of risk involved? Seeking professional advice from both a mortgage broker and a financial adviser will help you make an informed decision that aligns with both your needs and those of your child.

Final Thoughts

Helping your children or grandchildren climb the property ladder is one of the most impactful ways to provide financial support, but it requires thoughtful planning. Whether through gifting a deposit, offsetting their mortgage, co-signing a loan, or leveraging your own home’s equity, there are multiple ways to make homeownership a reality for the next generation.

Providing financial aid is only part of the equation. Offering guidance on budgeting, mortgage applications, and long-term financial planning will equip them with the tools they need to manage their homeownership journey successfully.

For personalised guidance on the best way to assist your child’s home purchase, speak with one of our expert mortgage brokers at John Charcol. We can help navigate the complexities of mortgage products and financial strategies to find the right solution for your family.