09 June 2016

Ways of supporting your child as a first time buyer

As house prices rise, many people will want to give their children a leg up onto the property ladder. But don’t panic, as there’s still hope for the Bank of Mum and Dad.

With so many things to budget for, parents shouldn’t feel guilty if they don’t have thousands of pounds available which can be put towards their son or daughter’s first home. We’ve decided to take a look at the alternative types of support they can offer.

Remortgaging a home

Remortgaging may be worth exploring if you’re keen to raise funds on behalf of your child. Seeking out a new mortgage deal might allow you to increase your borrowing – releasing equity which could then be put towards your child’s deposit.

But before committing to any remortgaging agreement, it's important to have some ‘me’ time and consider your own needs first. Above all, don’t get stressed out. Budget for what you can actually afford to pay each month, rather than over–stretching yourself.

For more information on remortgaging your home, why not read our guide?

Could you downsize?

Many people consider downsizing to smaller properties once they get closer to retirement, as the amount of space they need falls.

Downsizing might offer another way to help your children access the housing market without breaking the bank. By selling a relatively large family home and moving into a smaller property, parents could put some of the money they make from the sale towards their child’s deposit – helping the next generation start their own climb up the ladder.

Make yourself some money by renting out a room

If you’re willing to think outside the box, renting out a room could prove a clever way of making some money, which could then be ploughed into a family member’s deposit.

If you’ve got a spare room in your house which is going to waste, getting in a lodger or renting it out to tourists through sites like Airbnb may offer a new way of quickly generating some cash. If you sign up to the Rent a Room scheme, the first £7,500 of extra income you earn each year is tax free from April 6 2016.

Unsure about the potential costs of being a landlord? Read our guide.

Act as a guarantor

Of course, there are other ways to help your son or daughter access the mortgage market rather than simply raising money towards their deposit. As an example, certain types of mortgage allow you to act as a guarantor for a first time buyer, boosting their chances of securing a home loan.

Guarantor mortgages can take into account your income as well as your child’s, something which could increase the amount they’re able to borrow. But these mortgages should be looked at very carefully, as they’ll require you to guarantee your child’s repayments. If they fail to make them, you’ll ultimately have to foot the bill.

Enter into co–ownership

Rather than informally helping out your child by putting money towards their deposit, co–ownership could provide a more structured way to assist them in their hunt for a mortgage.

By agreeing to a joint mortgage with your offspring, you can ensure your income is also factored in during the loan application process. Your name will appear on the contract, along with your child’s, so you’ll need to be aware that any repayments will fall on you if your son or daughter encounters financial difficulties.

If you’re keen to find out more about co–ownership, check out the Money Advice Service’s guide.

Do your homework

With so many ways you can help your child on their journey to becoming a homeowner, it’s important to put in the time to properly research the various options.

Carefully review all of the potential risks and benefits, and speak to your son or daughter about the option which is best–suited to their needs.

Want to help your kids get on to the property ladder?

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