The bank of Mum and Dad

WITH rising house prices outstripping wages, would be young first time buyers are finding it difficult to get that first leg up onto the housing ladder as larger deposits required by lenders leaves a funding gap most cannot bridge.

So what are the options.

Stay at home and save longer?

Move into rented accommodation and pay rent rather than a mortgage?

Well it seems more are reliant on parents and grandparents to help and the so called ‘Bank of Mum and Dad’ has become the 10th biggest mortgage lender in the UK.

Experts say parents are likely to lend around £6.5 billion to their children and that will account for a quarter of all property transactions.

Some will be gifted and some will be as a loan with average figures of around £29,400 in London and £21,600 for the rest of the country.

Clearly not all parents are in a financial position to help their children, but those who can, are finding ways to assist including specific tailored mortgage loans by lenders such as the Nationwide Family Deposit Mortgage Range which allows families to raise funds from their existing property.

There are however a few steps you should follow if you are considering ‘Gifting a Deposit’ for a home purchase.

1. Confirm the gift in writing and state it is a gift and not a loan. A solicitor may need to prove to a lender that you have no future rights over the property.

2. Make sure your mortgage lender is informed, as this can cause issues later in the purchase process and they could even rescind their mortgage offer to you.

3. Anti-money laundering procedures will require ID for this person/people gifting the deposit. This can be in the form of copy of passport or driving licence, plus a document proving proof of address like a utility bill, bank account statement or HMRC letter.

If in doubt check with your Solicitor, Estate Agent or Qualified Mortgage Broker.

Richard Mace of Besley Hill said “the simple fact is that without some form of financial help many youngsters have no hope of saving the size of deposit required and it is a testament to the parents generosity if they can afford to help their kids get on in life.

Deposits of 10 per cent are still required as a minimum by most mortgage lenders, however, there are helpful products out there for first time buyers which we can access.

For more information, telephone 01453 542395