Is helping your child on the property ladder simply a matter of handing over the cash? Darren Polson explains the various financial routes and how they will benefit all parties
The Question
My son is a first-time buyer at the ripe old age of 35! I would like to help him buy his first home but need some advice on the best way to do this.
I have £45,000 in savings which I have earmarked for his first home. He’s also got some savings to put down as a deposit so, in total, he’ll have £60k.
Is it best to just hand the money over to him or is there a way I can go onto the mortgage and be a joint owner? I won’t be making the monthly repayments, and I already own my own property, so I am not sure of the validity of the latter option.
But simply handing over the money seems a bit irresponsible in case, for example, he met a partner, who moved in, or if he needed to move in future. Advice would be gratefully received.
Darren’s Answer
It is great to hear that you are in a position to help your son onto the property ladder, and you have a few options available.
Gifting
If you provide funds in the form of a gift (which effectively means handing over the money), then you would relinquish any rights to those funds.
The benefit of this approach is there is no requirement from yourself to be responsible for the mortgage, and nor would you need to provide any additional documentation, other than proof of where the funds originated.
If you are unsure of the parameters of the money you are providing or if you would like a guarantee put in place, it’s worth seeking legal advice.
Joint Borrower, Sole Proprietor (JBSP) mortgage
Alternatively, there are Joint Borrower, Sole Proprietor (JBSP) mortgages available, which are effectively guarantor mortgages. These are designed for clients who don’t quite have the income or credit history to get a mortgage on their own. This helps them to get onto the property ladder with (in most cases) the support of a parent.
In this scenario, your son would own the property, but you both would be named and liable for the mortgage. You would also be subject to the lender’s application checks for affordability and credit score.
If a partner moved in, the mortgage would remain unchanged as your son would still own the property and any equity gained from the deposit. If he sold the property or remortgaged to add another person, he could then repay the funds to you at that stage (if you would like the funds to be repaid) or use those funds for his next purchase.
As mentioned above, independent legal advice would be recommended.
How to decide on the best option
The first step in your journey is to speak to a mortgage broker who can guide you through the process and provide a Decision in Principle, which will let your son know how much he can borrow before making an offer on a property.
A mortgage broker can also discuss your options in more detail to help you with your decision.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over three years and every week he answers YOUR mortgage questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
