For today’s first-time homebuyers, getting on the property ladder has been much harder and more expensive than 25 years ago. Back then, only a year’s worth of savings was sufficient for a young couple to secure a deposit for their first home. Nowadays, it would probably take them between 10 and 13 years!
Fortunately, in the midst of all these difficulties, families can now rely on a few innovative lenders and their creative schemes to help the youngsters buy their first home. As long as the young couple continues paying their mortgage, all the helpers involved retain access to their savings. They can withdraw their money plus interest the moment the initial mortgage deal finishes.
Here’s an insight into several ways available to help your children in their mission of becoming independent homeowners.
Be your kids’ personal bank
Not many parents are wealthy enough to simply buy their kids a new home. Even if they can, they would rather have their children become financially independent and capable of taking on the responsibility of buying their own house. Such parents would sooner choose to give their kids only a part of the money as financial aid.
If this sounds acceptable, make sure to play by the rules so you wouldn’t unintentionally burden your child with a stamp duty bill. Only first-time buyers are exempt from this duty, so if you join your kids in the mortgage application as someone who’s already a homeowner, both you and they will be liable to stamp duty.
With this in mind, it’s a better option to help your child financially by giving them a regular sum of money monthly, rather than one bigger sum. This is known as “gift out of normal expenditure” and as such, it can be unlimited and inheritance tax-free.
Some aging parents may even decide to sell their home and a relocate to a retirement facility, such as the retirement living of Mark Moran Vaucluse that offers excellent wellness programs, a big social community and quality care. This is a way for the older generation to avoid putting their own retirement comfort and security at risk, but still be able to assist their children with the excess money from their home sale.
Helping without borrowing money
If you’re struggling with the idea of going into debt in order to help your children, you can still assist them without having to borrow money. In this case, your income will be taken into account along with your kids’ so they stand a better chance of getting more money for their home purchase. This is called a guarantor mortgage and you as a guarantor must agree to take on any mortgage payments your children fail to cover.
Another option is to take a joint mortgage, where you also take responsibility for any payments your children can’t afford but you become a legal owner of the part of your kids’ new property. In agreement with your child, you get to decide what share, if any, of monthly payments you would cover.
Whatever strategy you choose when supporting your children on their way to becoming property owners, don’t forget there’s always a certain risk involved. It all comes down to weighing your options carefully and choosing the one that is the most acceptable and affordable in the next five to ten years.