6th Nov, 2019
As parents, how can you help?
Give them a financial gift
One of the most common ways to help young people onto the property ladder is with a financial gift — the aim being to boost their deposit, borrowing power and mortgage deal.
Currently, parents can gift up to £3000 a year without being charged inheritance tax, and you can also carry over an unused gift allowance from a previous year.
If you are giving a financial gift and if your child is buying with a partner or friend, you can also protect the money in the event of a break-up with a declaration of trust.
Loan them the money
If you think you can afford to help your child as a temporary measure but need the money to be returned, you could consider loaning.
The loan would need to be declared to a mortgage lender, and this could have a significant impact as it needs to be factored into the mortgage repayments. Some banks don’t offer a mortgage based on a loan.
Use your own home as security
It is possible to use equity in your home to secure your child’s mortgage against. If they are unable to keep up payments, you must be aware that you would be liable for part of the loan and this would then have wider financial impacts.
Be a guarantor on their mortgage
Guarantor mortgages allow you to act as a guarantor for your child’s debt. If they are then unable to make mortgage repayments, it would fall to you to take responsibility.
Guarantors can be taken off the agreement later if it’s proven that the purchaser can manage on their own.
Buy it with them
Taking out a joint loan would mean you and your child would be equally responsible for repaying a mortgage. This is worth considering because with your combined incomes perhaps you can afford to take on a larger mortgage.
Use equity release
If you don’t have the savings to give a financial gift and don’t want to borrow against your property, you could consider releasing equity in the home – but get advice on this first. The money could help boost your retirement fund as well as help your child out in the meantime.
Make sure you get advice and consider your options carefully as it can have a substantial impact on your finances.
If you’d like to talk to us further about getting your child on the property ladder, please get in touch with one of our team here.
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