Bank of Mum and Dad

 
Who are they? Well, they form one of the largest banks in the UK, as they are more commonly known for being a guarantor of sort or contributing towards their children’s property purchases through helping them increase their deposits. You may be thinking how much influence does the bank of Mum and Dad have? Lloyds Bank calculated parents spend approx. £8 billion a year helping their children buy a home.
 

3 things you need to get a mortgage

 

  • A good income
  • A good credit rating
  • A good Deposit
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    The first two criteria are things you can control yourself. However, saving for a large enough deposit is becoming more and more difficult. Long gone are the days of getting a 100% mortgage, for if you want to buy a property now, you will need a deposit consisting of at least 10% of the asking price. It is probably much harder to get onto the property ladder than ever before but, with a little help it may well take you from potentially thinking that goal will never come, to then re-thinking what colour you will be painting your new kitchen
     
    Conceivably it could be a first time buyer or a next time buyer topping up on the deposit that could make the difference in getting the property you want, because the average salary is not increasing in line with today’s house prices and so, as prices are becoming steeper, the need for a larger deposit to cover the difference is much more important. This can also be extremely beneficial in reducing the cost of your mortgage and as a first time buyer owning a property for the first time comes with a responsibility of ensuring the monthly payments are affordable and can be budgeted for.
     

    How much can I gift my children towards their deposit?

     

  • You can gift as much as you would like, it could be a portion of the deposit or the whole thing. But please keep in mind there may be inheritance tax due on this if you pass away within the 7 years of your gift.
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    All the money is tied up now, how else can I help my children?

     

  • If you have a property which is mortgage free or has a small balance it is possible to release capital out of that property for it to be used as a gift for a deposit for your children.
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  • You can help by being the supporting applicant on an application, as their income can be used for affordability and does not need to go on the property deeds through a joint borrower, sole proprietor mortgage.
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    With any methods it is just as important to ensure you are well protected and does not impact your lifestyle or effect your retirement in the event of helping your children with contributions towards their mortgage of any sort.
     
    It is always worth a review of all the options, and a good start is knowing how you can help your children/grandchildren by keeping them informed, though just as important for individuals is to know there is help there, such as the Bank of Mum & Dad.
     
    If you would like to discuss how you could help your children get on the property ladder, please get in touch.
     
    This article was written by our mortgage adviser Jayan Patel.