Getting family help onto the housing ladder
Last updated: 03/04/2023
You might be lucky enough to have parents, or other family members, willing and able to help you onto the property ladder. Financial support from your family could help you achieve your goals faster - but it's important you all go into it with a shared understanding. So what kind of help could you ask for from the “Bank of Mum and Dad”?
Help with your deposit
A family member can gift you a lump-sum of cash towards your deposit. It’s important everyone understands you won’t be repaying the money and they’ll have no legal rights over your property.
What to do:
- Have proof of the money: your solicitor and lender will want to see some proof of where the gifted cash has come from; a bank statement will usually do the trick.
- Get advice: it’s not nice to think about but you may have to pay inheritance tax if the person giving you the money dies within seven years of gifting you the cash. It’s worth getting independent financial advice to be clear on whether you’d be liable for inheritance tax should the worst happen.
Unlike a gifted deposit, a family member can loan you the money. This means they’re expecting you to pay them the money back. A formal loan agreement can cover things like the details of a repayment plan and any interest you might need to pay on the amount they lend you.
What to do:
- Have proof of the loan: your lender will want to see your loan agreement and you should be aware that in mind that some lenders might refuse a borrowed deposit.
- Get advice: a loan agreement is a legal document, so you’ll need a legal professional to do this work for you. Talking to a mortgage adviser could also be helpful to get an understanding of which lenders are likely to accept a borrowed deposit.
Help with your mortgage
With a guarantor mortgage, a family member guarantees to cover the cost of your mortgage if you can’t. This can help first-time buyers by reducing how ‘risky’ it seems to lend to you – and making you a more attractive candidate for a mortgage. If you fall behind on your payments, your guarantor needs to step in. They become liable for your repayments (and any missed payments).
What to do:
- Get advice: it’s a good idea to speak to a financial adviser before committing to a guarantor mortgage.
You to add the incomes of family members to your mortgage application to help increase the amount you can borrow.
With something called a ‘Joint Borrower Sole Proprietor’ (JBSP) mortgage, multiple applicants can take joint responsibility for mortgage repayments, without actually sharing ownership of the property.
One of the appealing features of a JBSP is that as only the child is named on the property deeds, the parents (or grandparents) can avoid paying extra tax (they’d usually have to pay an extra 3% stamp duty payment if they bought a second home).
There are other advantages, depending on which lender you choose. With a JBSP mortgage from Principality Building Society, up to four applicants can be accepted on the mortgage, and there isn’t a required minimum income for the application. There may come a point when you’re ready for your relatives to come off the mortgage, which you can choose to do when you’re ready. With a Principality JBSP, your relatives can stay on the mortgage for the full term if that’s what you’d prefer. Explore the Joint Borrower Sole Proprietor mortgages we could offer you.
This is just an introduction and there are other options and things to consider. Taking on a mortgage is a big commitment, so it’s important to think everything through and make sure you can afford the monthly payments. If you can’t keep up with the payments, your home may be repossessed.
If you’re house-hunting on a strict budget, we have some useful tips on where to spend and where to save.