How can I help my kids get onto the property ladder?
Posted on 1 March 2017 by
With high house prices, tough affordability checks and the ever-increasing pressure on the amount of deposit a first time buyer needs to save, it can feel like it's increasingly more difficult for first time buyers to take the first step onto the property ladder.
And as a parent there comes a time, after 18 years of raising your child, supporting them through university and seeing them get a good job, that you dread hearing the words, “Mum, Dad – I need my own place how can I get a deposit? How much do I need?
So, if you’ve already converted their old bedroom into a gym and want to help them up onto the property ladder, but don’t have the money to simply lend or give them the cash they require, here we look at what options are available to you:
1. Guarantor Mortgages:
With guarantor mortgages, the amount your child can borrow is based on your income and assets, as well as theirs. You’d be guaranteeing to meet any repayments that your child failed to pay, which could be risky, especially if you still have a mortgage on your own home.
2. Joint Mortgages:
A joint mortgage considers both your and your child’s income, as well as any money outstanding on your own mortgage. Both you and your child will be named on the mortgage agreement and on the deeds, providing you with some power over any future transactions. But you would also be liable for keeping up the mortgage repayments.
If you have a mortgage on your own property, one option that is available is to free up some cash by remortgaging. This would involve arranging a new mortgage with your existing provider or transferring to another lender. Your mortgage term could be increased to absorb the additional borrowing, your repayments could rise, or both. A further advance from your existing lender is another form of loan you could get that would be secured on your home. Before remortgaging it’s important to consider the impact that increased borrowing would have on your own standard of living and your retirement plans.
4. Joint Borrower Sole Proprietor:
A limited number of mortgage lenders are offering sole proprietor and joint application mortgages, enabling parents to help their children onto the property ladder. This form of lending allows parents to use their income on the mortgage application without being named on the title deeds at Land Registry. If the parent does go on the mortgage application but not on the deeds, some banks have said they will not have to pay the additional stamp duty or capital gains tax
If you do have some savings for a pension, but perhaps don’t want to give it all to your child to fund their deposit one option that you can use is a Springboard Mortgage whereby the lender will offer your child the ability to buy their home without a borrower deposit if you can provide 10% of the property’s price as security. At the end of a fixed term if your child has kept up with the repayments you’ll get your money back with interest.
For more information on the options available to parents helping first time buyers or for advice with more conventional types of first time buyer mortgages call us now on 0344 346 3672 or submit an enquiry here.
The blog postings on this site solely 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.