Helping children and grandchildren onto the property ladder

With high house prices, increases in interest rates, and tough affordability checks, it can feel like it’s becoming more and more difficult for first-time-buyers to make that step onto the property ladder.

After many years of raising a child there comes a time when parents dread the words " Can I have some help with my deposit please?".

Guarantor mortgages

There are a number of different types of guarantor mortgages, but typically the parent uses some of their money or assets as security for the lender and may be required to cover any repayments that the child failed to pay. This could be risky, especially if there is still a mortgage secured against the guarantor's own home.

Joint mortgages

A joint mortgage considers the income of both applicants, and takes account of any of their existing financial commitments. Both applicants will be named on the mortgage and on the title deeds. This provides the parent with some power over any future transactions, but both parent and child would be jointly and severely liable for the mortgage repayments. It is also worth noting that there may be increased Stamp Duty Land Tax liable, due to the 3% surcharge for purchases of additional properties.

Remortgaging

One option that may be available is for the parent to release some equity from their own property by remortgaging. This could involve arranging a mortgage with a new lender or a further advance with their existing lender. Before remortgaging, it is important to consider the impact any increased borrowing might have on standards of living and retirement plans.

Joint Borrower Sole Proprietor

This involves having two people named on the mortgage but only one person named on the title deeds. This enables a parent and child both being named on the mortgage and therefore allows the parent's income to help towards affordability calculations. One benefit of this route is the potential to avoid the additional Stamp Duty Land Tax surcharge because the parent doesn’t legally own the property, however it is only offered by a very limited number of lenders.

Your home may be repossessed if you do not keep up with repayments on your mortgage, or other loan secured on it.