With many first-time buyers struggling to raise the initially deposit for their ‘dream home’, it is not surprising that most parents are now helping their children raise the necessary funds.
The ‘Bank of Mum and Dad’ is now the UK’s 9th biggest lender. (Legal & General report)
‘It’ now contributes over 25% of the funds entering the UK housing market.
Over 80% of parents are now helping to finance their children’s house purchases. For nearly 60% this will be as a gift, whilst another 20% provide funds as an interest-free loan.
In general, mortgage lenders tend to prefer any parental input to be gifted. Any repayments to parents could affect your ability to repay the mortgage provider. Whether gifted or loaned, parents should put in to writing the exact details of this financial arrangement.
In many cases, parents and other close relatives, are acting as guarantors for mortgages. Often attractive for first time buyers with low incomes or no wage history, the guarantor’s income is used in working out any mortgage deal. The guarantor will be liable for repayments should the homeowners fail with their responsibilities.
To read about what help could be available to you, read our Help to Buy article.
If you'd like to arrange to speak with a mortgage adviser local to you, please feel to get in touch with us at Reach 4 Mortgages today.