Helping Loved Ones Get Onto The Property Ladder
Sky high house prices, slow wage growth, student loans and rising rent costs mean that getting on the property ladder is challenging. But the desire to own a home remains strong for many young adults. Now, the affectionately known ‘bank of mum and dad’ (or bank of other family members) may wish to lend or give money for deposits and other house purchase costs. Our expert Mortgage Advisers will be able to discuss all options available to suit your specific family’s situation. Below are just a few options to consider. Before making any decisions about any deposit gifting, we will discuss all the options available to you, based on your affordability and borrowing profile, so you understand from the outset your deposit requirements.
Gifted Deposits
A gifted deposit is a sum of money that is typically given by a family member forming all or part of a deposit for somebody wanting to buy a property. It is not usually possible for friends to gift a deposit as most lenders will not accept this option.
There are some important points to consider
- The person gifting the money should seek independent legal advice to understand they will have no interest in the property and no right to get their money back.
- It is possible to loan money to family and have it repaid on sale of the property i.e. take a legal charge over the property. Again, seeking independent legal advice is a must and this would also have to be agreed by the mortgage provider.
- The mortgage product will not change because of the gifted deposit as most lenders are satisfied with family gifts. However, most lenders will not accept other third party giftors such as friends.
- The gifted deposit can be used in conjunction with the applicant’s own savings or an ISA.
- If the person gifting the deposit is withdrawing funds from existing investments or pensions advice should be taken from an IFA or accountant regarding any tax or future income implications.
Can a giftor borrow the deposit?
If those wishing to gift a deposit do not have available capital to lend, some lenders will consider lending the gifted deposit amount to the giftor. However, all the usual credit, proof of identity and affordability checks apply. As your broker, we will need to know that if this is an option, that you wish to consider, we need to know from the very beginning of our discussions as this option is limited to only a few lenders.
Joint Borrower Sole Proprietor Mortgages
We have access to lenders who will accept additional borrowers on a mortgage agreement, although the property itself will only be in a sole proprietors name. These JBSP mortgages need to be carefully considered, especially if help might be required for another child or grandchild in the future. Please call us to discuss this option in more detail.
Equity Release
There is also the option to consider the Equity Release/ Lifetime Mortgage option. We offer advice on such arrangements, but they are not an option to be undertaken lightly and restrictions will apply regarding age and circumstances. Other options may be considered before Equity Release.
Download our guide for further information
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For further details about the mortgage and protection products we offer as a fully independent mortgage broker, or any other mortgage information, book your FREE CONSULTATION with one of our expert Mortgage and Protection Advisers.
