Currently, it’s become more expensive and difficult for a first timer to get on the property ladder. Given these difficulties, it’s not surprising that a lot of first time buyers seek help with their purchase, mostly from the Bank of Mum and Dad. However, if as a parent, you decide to help your children get onto the property ladder, you need to be aware of the potential pitfalls that come with doing that. A lot of things influence this decision including your financial state, approach to parenting and the relationship you have with your kids.
To protect your interests and that of your children, you should ensure that the way you’re going about rendering your help is the right way. Finding the best mortgage deal in the market place is not an easy endeavour but if you can’t go through the stress, there’s always the option of employing the services of Mortgage Saving experts.
An easy approach you can also take to help your child is to give him/her a good sized deposit of the property value. Presently, it isn’t attached to any immediate tax implications. Other ways you can help your child include:
Acting as a guarantor
Acting as a guarantor for your child allows borrowers to get larger loans than a lender would have been willing to grant in the absence of a guarantor. This type of mortgage deal is referred to as guarantor mortgages. Parents will have to offer their homes as collateral for their children to get this mortgage. The lender puts a charge on 25% of equity that the parents have in the property. If the children pays up, there will be no need for the parents to pay. The pitfall attached to this mortgage deal is that you might need to remortgage your home if your children fail to repay their loan. Your home might even be repossessed in extreme circumstances.
Opting for parents offset mortgages
In this mortgage deal, you put your savings into an account that’s linked to the mortgage of your child. It serves as a deposit on the property your children intend to purchase and they won’t be able to touch the money. The money remains yours but stays locked up till your children’s mortgage is worth 75-80% of the property value.
Agreeing to a joint mortgage
If you agree to co-own the property, you become liable for any payments that your children are unable to afford. You and your child will need to agree on the share of monthly payments you will take on. Your name will appear alongside that of your child on the contract and if he/she encounters financial difficulties in future, you will be responsible for any repayments.
Consulting an experienced mortgage adviser
Both you, your children and any other party involved need to have a good understanding of what a deal entails. It’s important to seek an impartial advice from a mortgage adviser as these mortgages are somewhat complicated. The Houseshop has experienced mortgage brokers that will give you quality mortgage broker advice at no charges.
There are various ways you can help your child become a homeowner, you just need to make sure that whatever deal you decide on is in the best interest of you and child.