When you are purchasing a home with a mortgage, there are a number of costs you will incur as part of the purchasing process. We outline the main ones here.
Research undertaken by Legal and General, in association with CEBR the economics consultancy, indicates that in 2017 the Bank of Mum and Dad will become the UK’s 9th biggest lender to first time buyers.
The report highlights this is due to a number of factors; including rising house prices, slow wage growth and the size of deposits required in more expensive housing regions. And, geographically, parents in the South West of England on average contribute the most per transaction, even more than in London.
Before you make any decisions, it’s always advisable to seek independent advice. Helping your child may seem like the right thing to do, but do ensure that it is affordable for you and that any agreements entered into are clear to all parties involved.
So, in what ways can you help your child (or grandchild) buy their first home?
- By gifted deposit – family members can gift a deposit sum which will help towards their child’s or grandchild’s property purchase. In the South West, without a deposit you are unable to buy a property with a mortgage. Help with providing a larger deposit, will both give your child the opportunity to buy and potentially lower the cost of the interest rate that will be payable.
- Additional borrowing on the family home – providing you own your own home, being retired or of older age does not mean you are not able to release equity from your property. If you do not have savings to gift, or your savings are tied into investments, you could possibly take out a mortgage on your home and gift the funds to your children to help them towards buying a home.
- Joint mortgage – sole ownership - if you, as parents, are employed or retired your income could be used towards obtaining a mortgage jointly with your child. This could potentially increase your child’s purchasing power and enable them to get onto the property ladder. You would be jointly named on the mortgage, however the ownership of the property would remain in the name of your child, this would mean you would not be liable for second home stamp duty costs.
- Help to Buy and Shared Ownership – there are also government schemes which offer the opportunity to purchase a share in a new build or resale property. The Shared Ownership scheme is a cross between buying and renting, and allows the purchaser to buy a share in a property, usually between 25% and 75% of the purchase price, and then pay rent on the remaining share. In these schemes, the deposit can be a lot lower than would be required when purchasing outright, therefore the help required with the deposit would be less.
If you would like to talk to us about mortgages please contact us, you can arrange an appointment in a branch local to you or by telephone.
YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGANST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.