House prices are a great deal higher in real terms now than they were for previous generations. Coupled with this is a situation whereby creditors are stricter than ever about income to borrowing ratios. In this climate, first time buyers can find it impossible to get mortgage and move into their own place. Many parents are in a position to help their children get a mortgage - here are some of the options.
If you're a parent with your own mortgage, remortgaging is one possibility. That means increasing the amount you are borrowing and, as such, increasing either the term or the size of your repayments. If you choose to remortgage, this could affect your standard of living or your plans for retirement, so think carefully.
If a child can get a mortgage but can't get one for the amount they need, a parent may wish to consider being a guarantor. With guarantor mortgages, mortgage providers factor parents' income and assets into their calculations, enabling them to offer higher amounts. If the child fails to keep up the repayments, guarantors are liable. This represents an added risk for parents who have their own mortgage to think about.
When parents are still earning an income themselves, a joint mortgage may be worth considering. With this arrangement, a mortgage provider will take both your earnings and your child's income into account (and also look at any money still outstanding on your own mortgage). With a joint mortgage, your name and your child's name will appear on the agreement and on the deeds, and, as with a guarantor mortgage, you would be responsible if your child failed to make their repayments.
For parents with substantial savings, a family offset mortgage, which allows you to offset your savings against the sum your child is borrowing, may be a more suitable choice. As an example of how this works, if you have 50,000 in savings and your child has a 150,000 mortgage, they'll only pay interest on 100,000. If you decide to proceed with a family offset mortgage, you won't be able to earn interest on your savings, but you will also avoid paying tax on that interest. For higher-rate taxpayers, this might be a sensible option.
If you're a parent with your own mortgage, remortgaging is one possibility. That means increasing the amount you are borrowing and, as such, increasing either the term or the size of your repayments. If you choose to remortgage, this could affect your standard of living or your plans for retirement, so think carefully.
If a child can get a mortgage but can't get one for the amount they need, a parent may wish to consider being a guarantor. With guarantor mortgages, mortgage providers factor parents' income and assets into their calculations, enabling them to offer higher amounts. If the child fails to keep up the repayments, guarantors are liable. This represents an added risk for parents who have their own mortgage to think about.
When parents are still earning an income themselves, a joint mortgage may be worth considering. With this arrangement, a mortgage provider will take both your earnings and your child's income into account (and also look at any money still outstanding on your own mortgage). With a joint mortgage, your name and your child's name will appear on the agreement and on the deeds, and, as with a guarantor mortgage, you would be responsible if your child failed to make their repayments.
For parents with substantial savings, a family offset mortgage, which allows you to offset your savings against the sum your child is borrowing, may be a more suitable choice. As an example of how this works, if you have 50,000 in savings and your child has a 150,000 mortgage, they'll only pay interest on 100,000. If you decide to proceed with a family offset mortgage, you won't be able to earn interest on your savings, but you will also avoid paying tax on that interest. For higher-rate taxpayers, this might be a sensible option.
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