How to help your children get on the property ladder

20 December 2019
With first time buyers finding it harder than ever to get on the property ladder, parents are spending more money helping their children purchase their first home. As a result, the Bank of Mum and Dad currently ranks as the 10th largest mortgage lender in the UK.
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If you’d like to help your children get onto the property ladder but don’t know where to start, below are just a few of the options available for you to consider.

Gift a deposit

Putting money towards a deposit is the most common way of helping your child purchase their first home. You may however be required to sign a written statement from the mortgage lender confirming that funds given were a gift and do not require repayments, as any loan repayments would need to be considered as part of the mortgage application.

Gifted deposits are tax free, but depending on the amount gifted your child could be required to pay inheritance tax should you pass away within 7 years of the financial exchange. 

Joint Ownership

For first-time buyers who can’t afford to buy a home on their own, taking out a joint mortgage with their parents is another viable option. With two sets of income taken into account on the mortgage application, your children may also be able to afford a larger mortgage and therefore a larger home. 

There are financial drawbacks of joint ownership though, including not being eligible for the first time buyer discount on stamp duty and having to pay capital gains tax on what is considered to be your second home when the property is sold. 

Act as Guarantor

Guarantor mortgages allow you to act as guarantor on your child’s mortgage debt, so you will be liable to make the repayments if your children can't. You can then be removed from the mortgage agreement at a later date, once your child can prove they can manage the debt on their own.

If you’re helping your children buy their first home and are in need of a Conveyancing Solicitor in Essex, please get in touch with our team.