Providing a Deposit

Posted on 21 August 2011 by J

I would like to help my son, 32, to buy his first home with his fiancee. They currently rent a property for £700pcm but have no deposit.

My husband is 71 and I am 58 and will soon be taking phased retirement from teaching. We have a mortgage on interest only of approx £100,000 the property is valued at approx twice that. The mortgage is due to be repaid in 2018. What would be the best way forward?


Depending on your anticipated income, I think that you may find it difficult to raise the deposit on your own property for a couple of reasons.  If you apply for a further advance from your existing lender, they have a duty to confirm that your income in retirement will support the new increased mortgage balance and it will be the same if you try to remortgage.  Alternatively an equity release mortgage, which is not based on your income but the property value, is unlikely to work because of your age.  These mortgages run until the property is sold and until then the interest is rolled up.  The longer you are likely to live, the higher the interest charges will be and so the lower the amount they can lend you at the outset will be.

Having said that I do think it would be worth talking to one of our consultants to check if we can help.  Please call 0344 346 3672 and tell the consultant the date and title of your question and they will then be able to advise you on your situation.

However you manage to provide the deposit, it is likely your son's mortgage lender will want confirmation that the money is a gift and not repayable.  You should seek independent legal advice about this and how to protect your interest, whilst also taking advice about any inheritance tax implications.


Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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