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The Bank of Mum and Dad – helping your children onto the property ladder

The Bank of Mum and Dad – helping your children onto the property ladder

March 8th, 2017

As parents we want to do the best for our children. Right from their first days, we have their interests at heart: we feed, clothe and love them – and we provide them with a home.

That parenting urge never goes away. Even when our children are adults themselves, we want to support them, and often that support is financial, courtesy of the Bank of Mum and Dad.

Sometimes the sums are relatively small – help to buy a car, or money for university books for example. But if your child is a first-time buyer needing funds for a deposit then we’re likely to be talking several thousands.

With the cost of home ownership increasing, as the value of houses rise, if our children are first-time buyers we may not feel able to afford the financial help they need. Parents who are contractors are no different – the call on the Bank of Mum and Dad is sometimes too great.

So what’s the alternative?

Many children of contractors – or young contractors themselves – opt for either renting, or staying living in the family home.

According to the most recent English Housing Survey, in 2014/15, the average age of first-time buyers was 33, up from 31 in 2004/05. Younger people (aged 25 to 34) are much more likely to rent privately – 46% compared to 24% in 2004/05. And the proportion of young people buying with a mortgage has dropped from 54% to 34%.

Renting is costly, and staying at home has its drawbacks. You love your children, but you don’t want them living with you forever.

So is there a third option? The answer is: yes

Mortgages for first-time buyers

If you’re a contactor with grown up children still living at home, or with children renting, who want to get on the property ladder, there are ways to help which don’t deplete your savings. You could opt for a loan, but there is no guarantee your child will be able (or willing?) to pay it back.

If you’re the first-time buyer, a deterrent is finding the money for a deposit, even though the monthly payments are affordable.

One product gaining in popularity with first-time buyers is a Barclays family spring board mortgage. Here, you don’t need to help with the deposit. You simply need to provide 10% of the property’s price as security. As long as the mortgage holder keeps up repayments, you get your money back – with interest. So if you are a parent with savings, this is just another way of investing your money and getting a return, but at the same time you are helping your offspring to secure a property.

If you work out the amount a mortgage will cost, over a significant amount of time, it is often more cost effective to buy straight away than it is to rent.

The message is, if your children want to get on to the property ladder, don’t let a lack of a deposit put them off – there are options out there.

For help and advice with mortgages, please get in touch with the team here at Contractor Mortgages.

Craig Calder, Director of Barclays Mortgages said:

“Buying a first home is a hugely important step in everyone’s life and one that has unfortunately become tougher for many in recent years. When Barclays originally launched the Family Springboard mortgage in 2013 we made the decision to help both homebuyers and the family who wanted to support their children, but couldn’t just give away large sums of money.

“We want to offer more people a way to get on, or move up the property ladder, and to walk through the door of their first home or even their forever home earlier than they perhaps thought.

“The Family Springboard Mortgage will be particularly attractive to those struggling to raise a deposit, or to parents who don’t want to have to give their cash away to get their children on the property ladder. The parents, grandparents or a family helper, aren’t a “guarantor” – they are not responsible for ensuring the mortgage is paid. And after three years, the helper will see the return of their deposit, with interest, provided the mortgage payments have been kept up to date.”

Media Contact: Sarah Middleton, Public Relations Manager

Tel: 01489 555 080

Email: media@contractormortgagesuk.com

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