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Collectively, parents have given £6.3bn of financial assistance to help their children step on to the property ladder. A substantial figure, it ranks the Bank of Mum and Dad (BOMAD) 11th, if considered as a national mortgage lender.
The average contribution now stands at £24,100, an increase of more than £6,000 compared to 2018, research by Legal & General has revealed. However, it seems the Bank of Mum and Dad is running out of money and overly generous parents risk harming their standard of living during retirement. In fact, 15% of the 1,600 participants surveyed admitted to already having to cut back after helping a loved one purchase a property.
Fortunately, gifting cash isn’t the only way you can help a loved one step on to the property ladder and other routes to support homeownership should be considered.
At Newbury Building Society, our flexible and tailored approach to lending gives us the ability to help parents or grandparents boost their loved-one’s borrowing power without having to dent their personal financial well-being in several ways.
Joint borrower sole proprietor mortgages, for example, is one such consideration, which enables parents to help their child by assisting with their mortgage. Their income is used to improve overall affordability without being named on the title deeds. By doing so, the parent does not have to pay the additional three per cent stamp duty surcharge on a second property, as well as capital gains tax when the property is sold.
Parents could also remortgage or downsize their own property to release equity to help fund a deposit, if appropriate to do so.
In addition, there are several affordable housing schemes available to support homebuyers fulfil their property ambitions with more than 420,000 completions taken place using one or more of the Government’s Help to Buy schemes, such as Help to Buy Equity Loan and Shared Ownership.
Needless to say, the Bank of Mum and Dad isn’t set to close its doors anytime soon, but parents can rest assured there is more than one way to unlock a loved one's borrowing potential.
If you'd like to talk to a qualified mortgage adviser about your options, contact us today.