The Bank of Mum & Dad


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It’s not uncommon for first-time buyers to struggle gathering a deposit together, especially in competitive property markets like London.  Consequently, one in four properties purchased this year will be partially financed by the Bank of Mum and Dad.

The Bank of Mum and Dad refers to money given by parents or grandparents to their children or grandkids in order to help them invest in property. Recent research conducted by Legal and General revealed that parents give an average of £17,500* per child to help with a deposit, surveying fees, legal costs and Stamp Duty.

Unfortunately, not everyone benefits from the Bank of Mum and Dad. However, there are other ways to gain the right capital for buying your first property, including considering Government aid.

What is the Bank of Mum and Dad?

The Bank of Mum and Dad refers to money given by parents or grandparents to their children or grandkids in order to help them invest in property. Recent research conducted by Legal and General revealed that parents give an average of £17,500* per child to help with a deposit, surveying fees, legal costs and Stamp Duty.

Unfortunately, not everyone benefits from the Bank of Mum and Dad. However, there are other ways to gain the right capital for buying your first property, including considering Government aid.

How can the Government help?

Getting on the housing ladder for the first time is a daunting experience and one that many first-time buyers can only find achievable with assistance from their parents. There are other ways to find ‘free money’ that can help you in your property investments, one being the often overlooked Government Help to Buy ISA scheme.

Help to Buy ISA scheme

This Government scheme provides a small amount of financial aid to those looking to get on the property ladder for the first time. It can be used to boost your savings by 25%, meaning that for every £200 you save, you’ll receive a tax-free Government bonus of £50. The maximum Government bonus you can receive is £3,000.

Additionally, Help to Buy ISAs are available to each individual person rather than each household. This means that if you are planning on buying property with a partner, you could double your money and receive a Government bonus of up to £6,000.

Additional ways parents can help

1. By becoming guarantors

If your parents have not got the funds to help you with a deposit, they may be able to act as guarantors instead. This means that if you are ever unable to make any mortgage payments then they would pay in your place.

This can be a useful financial aid in times of need although it is important to understand that both you and your parents could be at risk if you default on your mortgage. You should also remember that while many parents are keen to assist their children in getting on the property ladder, it should not be done at the risk of their own financial security.

2. With a family offset mortgage

Another finance option is a “family offset” mortgage. This is when parents use their savings to help their children or grandchildren invest in property whilst still retaining ownership of the money.

This kind of mortgage works by placing both your own money and your parents in a linked savings account. The money then acts as a deposit and will lower the monthly mortgage repayment as interest is only charged on the balance remaining. This kind of mortgage allows the savings to remain in your parents’ name so they can then revert back to them at a later date.

Children becoming home owners for the first time is seen as a huge milestone to many parents, often making them more willing to help out financially. Nevertheless, Government schemes such as London Help to Buy will ease some of the pressure off the Bank of Mum and Dad, and could make investing in London property a less stressful process.

*http://www.legalandgeneralgroup.com/assets/portal/files/pdf_216.pdf