How can I help my children buy their first house?

The Bank of Mum and Dad – How to help your child buy a home

First time buyers are finding it harder than ever to get the money together to finance their first home. As a result, many are turning to the 'Bank of Mum and Dad'.
Here's what you
need to know about helping your child buy a house.

These plans could allow you to take cash from the value of your home, without having to move out. If you own your property outright or if your property’s worth more than any loans you have secured against it, then you’ve more than likely got equity tied up in your home.

How can I help my child buy a home?  

There are several ways parents can help their children buy their first home: 
  • A financial gift
  • A loan
  • Putting your savings in a linked account
  • Acting as a guarantor on a mortgage
  • Getting a joint mortgage 
Do I need to get financial advice before I help my child buy a home? 
If you are thinking about helping your child onto the first rung of the property ladder, make sure you think it through first. Before you get involved in your child’s house purchase, we would strongly advise you get advice.  We can help you work out exactly how much assistance you can afford to give. 
How can parents protect a house deposit gift? 
If you are giving your child money for a deposit and they are buying with their partner or friend, you can protect the money you have gifted in the event they split up with a declaration of trust, or deed of trust. 

The solicitor working on the property purchase can draw up a declaration
 of trust. This states who the money was gifted to – so you can specify you gave it to your child and not to them and their partner. If the couple break up this document will ensure your child retains ownership of your financial gift. It can also clarify if the money is a gift or a loan, and if the latter when it needs to be paid back. 

The people buying the property can also use a deed of trust to lay out
 responsibilities for outgoings and what happens to the property if their relationship breaks down. 

Bear in mind though, that if your child goes on to marry the person, they bought the property with this could affect the deed of trust. 

While we are talking about the legal side of gifting money you should also
 consider updating your will to reflect the gift that has been made. Children may also want to write a will to ensure the gifted money goes back to their parents if they die.

The process of buying a house for your child 

1. Tell people. When you appoint a solicitor make sure they know that some or all of your deposit is coming from your parents. Also let your mortgage broker know as it can affect mortgage offers. 
2. Loan or gift. Lenders, solicitors and estate agents may need details about the money. A letter from your parents explaining that the money is a gift, including the exact amount, will be useful. If it is a loan then an agreement stating how much is being lent, any interest due and the repayment terms will be needed. 
3. Sort out ID. Your as well as the purchasers, will need to provide proof of their identity to your solicitor. Find out what your solicitor will accept and arrange it as soon as possible. 
4. Proof of funds. Anti-money laundering checks mean you will have to provide evidence of where the money for your deposit has come from. This means you will need to provide bank statements showing how you built up that money. 
5. Legalities. Ask your solicitor to draw up a deed of trust to show what happens to the money in the future. Make sure this covers whether the money needs to be repaid and what happens if the property is sold. 

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The choice of interest rate and product terms will depend on your circumstances and the amount of the mortgage. Before you make a mortgage application, we will carry out a full review to establish your needs and preferences and if you meet the criteria, we will give advice and make a recommendation to you. There may be a fee for mortgage advice. All mortgages are subject to status. Please note that all products show an indicative rate only and may not be suitable for you. You must be 18 or over.

Your home may be repossessed if you do not keep up with mortgage payments.

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