Helping your child or grandchild to buy a home

If you are fortunate enough to be able to help your children or grandchildren to get on the housing ladder there are a number of routes you can take.

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Recent news indicated that children are living with their parents for longer than ever before and new figures suggest that the average single first-time buyer needs to save for 17 years to raise a 15% deposit for their first home in London. (Sky News, 2018).

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The good news is that there are a number of options available to parents and grandparents looking to help their children. We look at some of your options.

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Take out a joint mortgage

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Taking out a joint mortgage can be a good option but there are pitfalls.  Everyone named on a joint mortgage is responsible for keeping up with repayments so it is important to be clear on how you would manage this in the long term as well as right now. In theory the more money that you can pool for the mortgage together, the better the choice of deals and providers that will be available.  It is worth keeping in mind that your credit report will show that you have a financial association with your child/grandchild along with any other people on the joint mortgage.  Consult a financial adviser to get advice tailored to your personal circumstances.

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Help out with a gifts or loaning cash for a deposit

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As saving for a deposit rather than affordability tends to be the challenge for many first time buyers, perhaps the easiest option to help is to give money as a gift (being mindful of inheritance tax repercussions) or simply as a loan. This will help them to meet the criteria for a deposit on their first home and potentially secure a better mortgage deal but the ‘source of funds’ does need to be declared by the individual during the conveyancing process.

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Having a family savings account in which other members of the family can contribute could be a simple way to raise cash to help if there are lots of generous family members. Using a Help to buy scheme ISA, mortgage or equity loan could also be useful for your children to start saving money for their deposit.

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Consider joint ownership

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Owning a home with your child or grandchild can be as joint tenants or tenants in common. They have some key differences, which are worth understanding before entering into any kind of joint ownership.
Joint tenants have the same rights to the property and no definable percentage ownership. The joint owners cannot be pass on their share of the property in their will as in the event of one owner passing away their percentage will go to the remaining owner.

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Tenants in common can own an agreed percentage share of the property and can then pass on their percentage in their will as opposed to the ownership being transferred to the other owner upon death.

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Act as a guarantor

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A slightly riskier option is becoming a guarantor on your child/grandchild’s mortgage, this is not without risk as if your child or grandchild is unable to keep up with repayments then you will become liable for that debt.
Always get professional advice before entering into any agreement.