With the property market being so uncertain, it can be a worry about how your children will make their way onto the ladder. As the housing affordability gap across the UK continues to be a concern, it can be a challenge for young people to afford a house and to move out of the family home. We have decided to take a look at ways in which you can help your children get onto the property ladder. By doing so, you can ease your worries about them being unable to move on and fly the nest.
One option that many opt for is opening up a savings account for your child when they are born. Over the years you can set aside some money each month and at a certain age, usually twenty-one, you can gift your child the sum you have accumulated. Due to this method being long-term, you can save a large amount of money without it affecting your own finances too much. For example, if you were to put aside £100 a month for twenty-one years, you would have a final sum of £25,200, which is an excellent deposit for a home. It is surprising how much you are able to save!
To help your child get onto the property ladder, it can be useful to provide the mortgage lender with the added security by becoming a guarantor. The purpose of becoming a guarantor for your child is that if they are unable to pay for their mortgage or meet the terms of the loan, the responsibility falls onto you. So long as you are comfortable with this arrangement, being a guarantor can be a great option to help your child buy their first home because it requires no savings from you or any release of equity on your own home.
Whether it is with a partner, friend, family member or in fact yourself, it can help significantly to buy a property with another person. Having more than one person means more than one income, which, in turn, can increase the mortgage available to your child. Having a larger mortgage means that there is more opportunity to find a home your child can afford. To ensure the process is smooth, you need to be sure that all parties involved clearly define their ownership and obligations.
A popular method for getting on the market, shared ownership is where you buy part of the property and pay the remaining in rent. It is a desirable option because it makes ownership of a property far more achievable and affordable. Additionally, when it comes to selling, you should have generated a considerable deposit for your next home. Suggesting shared ownership to your child is not only beneficial to them, but it also keeps you out of the financial equation. Your child is given the independence from you and can essentially get onto the market by themselves.
If you are over the age of 55, you can use something called “Equity Release”, and this essentially means taking out a lump sum of money from your home. By taking out this money, you can provide your child with a deposit for their home. Something to be aware of though is that there are tax implications when it comes to gifts over a certain amount. Additionally, all money used as a deposit must be declared to the mortgage company at the time of application.
We hope we have provided you with some options to help your child get into the property market. For some more assistance with the process of buying a home, take a look at our blog on what to expect as a first-time buyer. Here you will find everything your child needs to know before making the step onto the property ladder. As estate agents in Okehampton, Devon, if you are interested in properties in the region of West Devon and on towards Exeter, we are happy to help! Give us a call on 01837 54504 or visit our Contact Us page!