5 Ways To Help Your Child Buy Their First Property
There are now several ways you can help your children or grandchildren onto the property ladder – here we look at the 5 top ways you can make your child’s property dream a reality.
This type of mortgage deal helps with the affordability of the mortgage but not the deposit. However, it does ensure that the buyer qualifies for first-time buyer stamp duty exemptions, while the parents avoid the additional 4 per cent stamp duty surcharge for a second home in Scotland. As they don’t share ownership of the first-time buyer’s home, parents can also avoid paying capital gains tax on any increase in value when the property is sold.
100% Family Mortgage range (short of deposit but have income)
This means that parents or grandparents who aren’t in a position to give money can still share the benefits of their wealth. However, for the buyer it means that they have to stay in the property until its value increases enough to give them a substantial deposit in order to move up the housing ladder and if house prices fall, they could be in negative equity. Remember, there is a risk that you could lose your home if your child’s house is repossessed and there is not enough money to repay the loan.
Student Guarantor Mortgages (no income but deposit available)
- Anyone who is over 18 and under 50 may be eligible.
- You will need to have sufficient income and if not a guarantor will be required.
- The guarantor must be a direct family member who already owns a house.
- They must live in the UK and have permanent right to reside here.
- All lender will take the term to the guarantors 70th birthday. In some circumstances it may be possible to use lenders that elongate this term to age 80.
- You will be required to place at least a 10% deposit down if you wish a capital repayment mortgage. Interest only options are currently available but only to cover your period during studies and a larger deposit of at least 25% is required.
Remortgage your own home
You could give your child the lump sum raised to use as a deposit as a simple non-returnable, tax free gift. Gifted money could be subject to inheritance tax – you must live longer than seven years from the date you gift anything over your £3,000 annual allowance to avoid this.
Remember if your child is buying a home with a partner it’s important to draw up a legal document such as a Declaration of Trust. This protects the buyer the gift was given to, and the share of the property to which they are entitled should they part ways.
It’s worth noting that if you lend the money to your child, rather than gift it, not many lenders accept a parental loan as a deposit and will take the monthly repayments into account and further restrict the amount your child can borrow.
Equity Release and Retirement Interest Only Mortgages (55+ retirement options)
For those that have plenty of wealth in their home but with a low income they could unlock the equity in their home using Equity Release. This option is available to borrowers aged over 55 and is dependent on age and health rather than your income.
Both the above options can also reduce your inheritance tax liability, as the value of the equity released will be deducted from the overall estate when the inheritance tax bill is calculated.
Being independent we have access to the whole of market to ensure we get the best product to assist your child onto the property ladder.
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