Today, house prices are far higher in real terms than they were for previous generations. At the same time, creditors are less flexible with the amounts they are willing to lend. As a result, first time buyers often have difficulty getting a mortgage and moving into their own place. For parents who wish to help their children take this step, there are a number of options.
For parents who have their own mortgage, remortgaging is one option. That means increasing your loan and thereby either increasing the term or increasing your repayments. This additional borrowing could have an impact on your standard of living or retirement plans, so take these things into account.
Guarantor mortgages are another option. With a guarantor mortgage, a mortgage provider will look at parents' income and assets and will normally offer a bigger amount than a child would be able to get on their own. If the child fails to make repayments, the parents are responsible for doing so. For parents who still have their own mortgage, this could be a risky choice.
For parents who are still working, a joint mortgage is another possibility. A joint mortgage takes both your earnings and your child's income into account (and also factors in any money still owed on your own mortgage). This arrangement means there will be joint names on the mortgage agreement and the deeds, and that you would be liable if your child stopped paying their share.
For parents with substantial savings, a family offset mortgage, which allows you to offset your savings against the sum your child is borrowing, may be a more suitable choice. As an example of how this works, if you have 50,000 in savings and your child has a 150,000 mortgage, they'll only pay interest on 100,000. If you decide to proceed with a family offset mortgage, you won't be able to earn interest on your savings, but you will also avoid paying tax on that interest. For higher-rate taxpayers, this might be a sensible option.
For parents who have their own mortgage, remortgaging is one option. That means increasing your loan and thereby either increasing the term or increasing your repayments. This additional borrowing could have an impact on your standard of living or retirement plans, so take these things into account.
Guarantor mortgages are another option. With a guarantor mortgage, a mortgage provider will look at parents' income and assets and will normally offer a bigger amount than a child would be able to get on their own. If the child fails to make repayments, the parents are responsible for doing so. For parents who still have their own mortgage, this could be a risky choice.
For parents who are still working, a joint mortgage is another possibility. A joint mortgage takes both your earnings and your child's income into account (and also factors in any money still owed on your own mortgage). This arrangement means there will be joint names on the mortgage agreement and the deeds, and that you would be liable if your child stopped paying their share.
For parents with substantial savings, a family offset mortgage, which allows you to offset your savings against the sum your child is borrowing, may be a more suitable choice. As an example of how this works, if you have 50,000 in savings and your child has a 150,000 mortgage, they'll only pay interest on 100,000. If you decide to proceed with a family offset mortgage, you won't be able to earn interest on your savings, but you will also avoid paying tax on that interest. For higher-rate taxpayers, this might be a sensible option.
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