Buying their first home can be exciting, but many first-time buyers can struggle to get on the property ladder – with the demand for high deposits, along with the difficulty in qualifying for a mortgage. There are ways you could support your child in buying their first home, depending on your financial circumstances and your view on what support you wish to provide.

How can you help?
There are a number of ways that could help them get on the property ladder.

• Gifting their deposit—worked out as a percentage value of the property. A larger deposit may give them access to better interest rates. There are currently no initial tax implications in doing this, however, if you die within seven years of gifting the deposit the amount gifted could be subject to Inheritance tax
• Use your home to raise cash—a secured loan can use the equity in your home to raise money for their deposit. You do need to bear in mind that if you can’t keep up repayments on a secured loan your home may be repossessed
• Equity release – lets you access the cash tied up in your home if you’re over 55. You could borrow up to 50% of the value of your home depending on your age and health
• Joint mortgage/borrower – you would legally own a share of the property and may be liable for any mortgage payments. Some lenders may decline to give a mortgage to borrowers over a certain age. It may also be considered a second home and you will be liable to pay increased Stamp Duty when the property is purchased and Capital Gains Tax on the profits if it’s sold. Although some lenders offer this without the parent going on the deeds or owning the property, which means there is no additional Stamp Duty or Capital Gains tax to be paid. 
• Family supported mortgage deals—you could deposit funds into a savings account linked to the mortgage which acts as a guarantee against the mortgage debt. This allows your child to secure a mortgage without needing a deposit. A condition is that you can only withdraw funds from your account after a certain period of time or once a percentage of the mortgage debt is paid off.

Getting on the ladder without financial help

If you’re unsure that you can afford to lend a hand financially, then there are other ways that could help.

• Let them move back home—cutting down their monthly outgoings so they can save easier
• Rent to Buy—Government scheme that enables subsidised rent on a qualifying property for a set period, after which they’ll have the option of either buying the property outright or entering into a shared ownership deal. No deposit is required
• Help to Buy—another Government scheme where the Government lends up to 20% of the cost of a newly built home, so they’ll only need a 5% cash deposit and a 75% mortgage to make up the rest

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

It’s important to remember the risks in all of the above options and you should consider the following:

• Can you afford to help, not just now but in the future
• Get professional advice from a solicitor, an independent mortgage advisor or an independent financial advisor
• Make sure you understand the terms of any mortgage before you sign up

The Mortgage Advice Service, provided by Tenet Mortgage Solutions Limited provides fee-free mortgage advice. They have independent access to the mortgage market and Tenet can advise you on the mortgage options that could help support your children or grandchildren, without putting yourself or your home at greater risk.

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