How to help your children buy their first home

Oakheart Property
With first-time buyers finding it harder than ever to get a mortgage, parents are offering a helping hand to help their children onto the property ladder. But how do you know you’re offering the best help and what are the potential pitfalls? Discover more in today’s blog on the different ways you might be able to help. 

High house prices, tough affordability checks and the need to save for large deposits have been long cited reasons why first time buyers struggle to get on the property ladder. If you’re looking to help your child buy a property, the good news is there are several routes available. 

Why might my child need help to get on the property ladder? 

Getting on the property ladder for the first time is harder and more expensive than ever before, with 54% of first time buyers using their parent’s cash to get started.

Given the difficulties first-time buyers face, particularly those with little in the way of a deposit, it can be difficult to secure an affordable mortgage deal to purchase their new home.

How can I help? 

The easiest way to help is to offer enough money for a good-sized deposit. In the current mortgage market, that is likely to be around 25% of the value of a property (although even 10% of a deposit will open the door to a broader choice of mortgage deals) 

There are no immediate tax implications at present so you can give as much money as you wish to your children tax-free. However, in the future, any gift you do give could be subject to inheritance tax if you pass away within 7 years.

Can I buy a house for my child? 

Yes, lending money to a family member to buy a house has become common practise, especially in the UK where property prices have risen very quickly. How they do this can vary between them buying the house outright, or helping their children with the deposit for a mortgage. 

Other options for first-time buyers 

If you’re saving for your first home and don’t want to turn to your parents for help or if you’re a parent looking to give your children the best advice, here are a few other options from schemes. 

Help to Buy equity loan 

These are only available on new build homes but could help you out on getting on the property ladder. If you have a 5% deposit the government may lend you 15-40% of the property price depending on where you live through a Help to Buy equity loan.

Shared ownership

This method allows you to buy part of the property and pay rent on the rest of the home. Typically people buy a stake between 25-75% from a housing association and pay rent of up to 3% on the remaining share.

Buying with a friend 

Many people buy with a partner or a spouse, but that might not always be an option. An increasing number of first-time buyers are teaming up with friends in order to cut the costs of the deposit, buying fees and mortgage repayments.

95% mortgages 

Rates on 95% of mortgages have fallen sharply over the year, so if you saved 5% deposit you are able to borrow enough, making them more appealing than they were in previous years.

Ready to buy a property in Colchester or the surrounding villages? Get in touch with our team today. Oakheart Property have an experienced team of sales and letting agents who will be more than happy to guide you through the entire home buying journey. 

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