Helping your children onto the property ladder

Buying a first house has always been a huge step for anyone, but in this day and age, it can be near  impossible to reach that particular step, especially for young people. So how can you help your  children get on the property ladder? 

There are various ways that you can consider assisting your children in entering the property  market, however, how you choose to invest that amount of money is an important decision so  choose wisely and think carefully about how it might affect your future. 

Here are some options you can consider: 

Give them a financial gift 

The most common and straight forward way is to gift your children with a lump sum of money that  they can use towards a deposit on a house. It will help them to get a better mortgage deal.  

Give them a loan 

Many parents opt to rather loan money to their children instead of giving it to them. A loan from a  parent, need not be paid back with interest, as it would from a bank, or at least you as the parent  can negotiate a much fairer interest rate on the loan. Whichever option you choose, Is it however  very important that a loan agreement be drawn up, especially if you child is purchasing the house  with a partner. 

Make use of a family offset mortgage 

Similarly, using a family offset mortgage will allow you to offset your savings against a family  member’s mortgage. This option can reduce the amount of interest your children may have to pay, if  they had to take out a mortgage alone. 

Be a guarantor on their mortgage 

Guarantor mortgages allow you to act as a guarantor for your child’s mortgage debt. Which means,  you provide a safety net for your child should they find themselves unable to make mortgage  payments. This approach also allows you to remove yourself from the mortgage agreement at a time  where your child can prove that they are able to manage the debt on their own. This is an especially  good option, if you child is at the beginning of their career and needs some time to build up their  savings. However, as the guarantor you would need to be sure you are able to service the loan, if  your child is unable to continue doing so themselves. 

Buy a house together 

Another great idea is to take our a joint mortgage with your children. You will then be equally  responsible for repaying the mortgage, and with your combined incomes your child may have more  options on how big the mortgage could be. Ideally, you child will eventually buy your half of the  property once its paid off or sold.

Using equity release to help your child buy a house 

You could consider releasing equity in your home to help your child buy a house. The money could  also help boost your retirement fund or pay for home improvements. A lifetime mortgage, is the  most popular form of equity release, as it allows you to release equity tied up in your home into cash  for you to spend however you want.  

Regardless of which way you decide to help your children get on the property ladder, it is important  to assess how it will affect your own financial future – your mortgage, your retirement etc. Likewise,  on a personal note, to avoid potential misunderstandings, it is important to be clear on whether the  money given to your children is a gift or a loan, and have the written agreements in place, if it is the  later.  

Consulting a reputable company like Advisa, to help facilitate such agreements is the best way to  ensure that both you and your children are protected, when making financial decisions.