5 ways to help your children onto the property ladder
In a time when we are continually facing property price increases it may be hard for your
children to save up enough money for a deposit or have adequate affordability to purchase
their first home. To help, we have put together 5 ways you may be able to help your child
overcome the difficulties of getting onto the property ladder.
Gifted deposit
A simple way to help is to offer your child all or part of their deposit. By raising their deposit
from 5% to 10% it could help improve their affordability and reduce their monthly
repayments. If you decide to gift a deposit to your child you must sign a written agreement to
confirm it is a gift, otherwise this may be treated as a loan by lenders and could affect their
affordability.
Equity charge
If you don’t have the cash available to gift to your children you could consider equity charge.
This is where you put a collateral charge on your family home instead of your child paying a
deposit. It is however worth bearing in mind that not all lenders allow this in their criteria.
100% guarantor mortgages
Another option is a guarantor mortgage where a charge is placed against your home. This
means that the amount your child can borrow is based on a combination of your and your
child’s income and assets. This could allow them to receive a 100% mortgage. However,
there is associated risk, as you would be guaranteeing that the repayments are made. This
means that the guarantor’s home could be at risk in the event that your child failed to pay.
Family offset mortgages
Alternatively you could consider a family offset mortgage. This type of mortgage enables
parents to offset the value of their savings against their child’s mortgage so they may pay
less interest. This is because their savings offset the sum of the mortgage that interest is
charged on. As a consequence you may not always receive interest from your savings.
Making sure your child is mortgage ready
Perhaps the best way you can help is to make sure your children are ready for the
responsibility of applying for and having a mortgage. You should make them aware of
budgeting and affordability so they have a realistic idea of what owning a home may cost
them each month. After all it is not just the mortgage repayments they have to think about.
Experts have also reported that many younger people are unaware of the extra costs that
arise on top of having a deposit, such as stamp duty and surveying fees as well as solicitor
fees. If they need help to save money for this you could help them open up a Help to Buy
ISA or a Lifetime ISA. These ISAs will support your children with their savings whilst also
receiving a 25% government bonus on limited deposits.
Additionally, you could offer advice on improving their credit score, as this is a common
problem when first time buyers apply for a mortgage. A credit score is often an important
part of lenders’ underwriting process to decide whether the applicant is suitable for the
product.
If you wish to discuss this area further then please don’t hesitate to speak to our adviser.

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