Mortgages for parents & children

“The Bank of Mum and Dad” is now involved in around 30% of all transactions. What does this mean? Parents are regularly gifting (and sometimes lending) money to their family so that they can buy somewhere, rather than continuing to rent, subsequently paying someone else’s mortgage.

We’re often asked whether deposits can be borrowed, and the answer is yes. Lending or borrowing the deposit can be achieved in different way. Ultimately, the lender must be happy with the terms and conditions of the loan. They factor in monthly outgoings the borrower will be committed to as well. Naturally, an example sum of £1000 per month will negatively impact how much the lender will agree to lend. But borrowing a deposit doesn’t mean there needs to be a monthly repayment.

Another common concern is from parents who want to gift to their child but are worried about what happens if their child splits up with their other half. Fear not, as there are arrangements that can protect you and your child. Ask one of our advisors to explain the options open to you, and if you’d like, we can have a joint meeting with everyone involved.

When it comes to age and mortgages, the possibilities are widely misunderstood. It’s probably the most commonly perceived reason why people think it’s impossible to get a mortgage between themselves and their parents or children. We are often met with surprise when we show people what age we can take the mortgage up to, and the term of the mortgage that is available – even when some of the borrowers are already retired.

Having a parent/child mortgage can bring up concerns about extra stamp duty, which can be an expensive tax payable to the government, especially if one of the parties involved owns a property already. Many of the solutions for multi-generational mortgage arrangements have already considered this, so there’s no need to worry.

This is jargon for “mortgage in several names but not everyone’s an owner”, i.e. avoiding ownership of several properties, which could have meant extra stamp duty is payable. This can easily be avoided. More lenders are beginning to see the value in offering these types of arrangements, which is only good for us, as this means more competition and better mortgage deals.

*independent legal advice is recommended to those considering guaranteeing another’s mortgage payments; speak to a mortgage advisor for direction.

Most people associate the word “guarantor” with “guarantee”. Although it would be easy to believe that a mortgage lender will happily allow a third party to guarantee a mortgage payment, they are sensible in how they approach this. Ultimately, a guarantor mortgage is virtually the same as a “joint borrower sole proprietor” arrangement, which means if the mortgage payments are not made by the main borrower/s, there are other parties on the mortgage contract expected to make the payments instead.

We’re pleased to say that more lenders are acutely aware of the challenges facing children and parents, which is great news because there are now more solutions than ever to help people get what they need safely, though like with any mortgage, the monthly payment needs to be paid in all circumstances.