Owning your first home is a lofty goal for anyone these days, taking into account the increase in house prices compared to the past decades and the increased costs of living it would be easy to become defeated and throw in the white towel.
But what is becoming more common is buyers getting a little hand up from family. Banks are open to receiving gifts, some guarantors or deed of acknowledgement.
How does this work? I’m glad you asked….
Lets start with gifting, the most simple form of parental help, and the key here is that gifting must be from family. Often landlords or friends want to help which is lovely but likely to be accepted.
Gifting is sometimes made up of parents savings, early inheritance or mum and dad top up their own mortgage and pass the funds to you. Either way its is a simple form to complete for the bank stating that the money is a gift not a loan, has no interest or expectation of repayment.
A deed of acknowledgement of debt is very similar and often used the same way as the gifting. This is an agreement that the gift will be repaid on the sale of the property. This is a great way of parents helping for the current situation as a temporary measure.
The trickier of the options is the guarantor, it is not favoured by the banks as it can put mum and dad in a pickle if you stop paying the mortgage. Its always easy to say it won’t happen but you just never know. Its really important to talk this option through and get independent legal advice.
A guarantor is where the bank will not only take over the security or your house but also the parents, so if something was to go sideways they could get their money back through both properties. It also involves a financial analysis of you and your parents, often they will also need the ability to pay your loan and their own debts just to get an approval for you. They need to be with the same bank as well. There are a couple of lenders that may allow your parents to be responsible for the deposit portion only rather than your whole loan, this is case by case. So this is not something to take lightly and you can see why gifting is the preferred option.
Now if all of those don’t work for you there is always another option, mum and dad buy the house and rent it to you until you can buy it. Part of your rent could go towards a deposit and the rest pays the mortgage so it is limiting the cost to mum and dad, like a rent to buy. At the point you can buy the property you will have deposit and the house would have increased in value. It gives you time to get yourself in the right position to get approved.
Where there is the will there is a way, call us today.
Contact Us
Avneet Singh
Mortgage Adviser
Phone: 027 2791 459
Email: [email protected]
