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Gifting cash isn’t the only way you can boost a loved one’s borrowing power

A young couple who have just moved into their first home celebrate with a cup of tea.

The Bank of Mum and Dad is running out of money. 

According to Legal & General, parents can’t afford to lend as much as they used to as the average parental contribution for home buyers during 2018 will be £18,000 – down 17% from last year’s £21,600.

Not a sum to be sniffed at, while some parents are in the fortunate position of being able to financially support their loved ones on a large scale, there are many who cannot handover a sizeable chunk of cash. 

However, not all hope is lost as there are alternative options for those who still want to boost a loved one’s borrowing power without having to dig deep into their pockets. Below, we’ve listed three to consider:

Joint borrower – sole proprietor mortgages: this type of mortgage enables parents to help their child by going onto the mortgage, using their income to boost overall affordability without being named on the title deeds. 

On doing so, the parent does not have to pay the additional 3% stamp duty surcharge on a second property, as well as capital gains tax when the property is sold. 

Equity release: no matter their age, parents and grandparents could remortgage their own property and gift the funds towards their loved one’s purchase as a deposit. 

Downsizing: it may sound extreme, but some parents and grandparents willingly sell their property and downsize if it means they are able to financially support their loved one’s property dream. More concerned about suitability to their needs rather than size, the Retirement Confidence Index reported that by 2036, the estimated equity release via downsizing could total £877 billion in the UK. 

Don’t forget: there are a number of affordable housing schemes available to help those who need extra support. Shared Ownership, Do It Yourself Shared Ownership and Help to Buy Equity Loan are good alternatives if parents are unable to financially support their child.
 
Read our article ‘What you should know about the Bank of Mum and Dad’ for further information. 

If you'd like to talk to us about a mortgage, pop into your local branch or contact us to arrange an appointment with one of our qualified mortgage advisers.

OUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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