March 10, 2017
With property prices rising it is becoming increasingly harder to purchase your first home. Due to this we are seeing more and more parents helping their children enter the property market.
So to all the wonderful parents wanting to help their children but are unsure of the best way, here are some of your options.
Sign on as guarantor
The hardest part about entering the property market is saving for a deposit. One option to assist your children with this is to sign on as guarantor. If you have enough equity in the family home or an investment property you can sign it up as security and no deposit will be required. Something to consider though is if your child hits financial difficulty and cannot make the loan repayments you will be liable for the remaining loan. However, some of our lenders do offer a limited liability guarantee which means you will not be responsible for the entire loan amount.
Gift the money for a deposit
If you have the funds available and do not want to sign onto the loan this may be your answer. Gifting the cash for a deposit is a great way to help your children purchase their first home without any liability towards their loan. It is important to remember however that our lenders require at least 5% genuine savings, this means they will either need to save 5% themselves on top of the gift or hold the funds in an account untouched for at least 3 months for the bank to consider it as savings. Although some of our lenders will accept rental history in lieu of genuine savings o you will not need to wait the 3 months before using the funds.
If you would like to give your children the money for their deposit but you do not have the funds available, it may still be an option. Borrowing the amount you would like to gift against your property is relatively low risk as the amount borrowed is quite small. It also means you will not be liable for your child’s loans repayments as you would be if you signed on as guarantor instead.
It is important to understand the best options for your personal situation. Come and visit us to discuss what options are the best fit for you to help your children on their way to purchasing their first home.