Getting up the property ladder for the younger generations has been proving more difficult in recent years, that is why many appeal to the bank of Mum and Dad to finance the deposit on the first home. But if gifting the deposit to your children is not convenient or possible, there are a few other ways to help younger family members start their journey up the property ladder. Here we look at a few current options:
Help Children Save with a Lifetime or Help to Buy ISA
When helping first-time buyers build their deposit it is worth looking into Lifetime or Help to Buy ISAs. With the Help to Buy ISA, you can save up to £1200 on the first month and up to £200 in the following months and the government adds 25% tax-free on top of your savings plus interest (up to £3,000). It is by far the first port of call for anyone looking into saving for a deposit on their first home.
Last year the Lifetime ISAs have been introduced, that allows you to save up to £4,000 a year and offer a 25% bonus on everything you save each tax year.
Reduce Mortgage Payments with an Offset Savings Account
With the minimum deposit of 5%, repayments can reach a rather high amount. That is why the family can land a helping hand by setting up an offset savings account. The way it works is that you put your savings in an offset account and while the money does not incur an interest they will be deducted from the total mortgage amount when calculating interest. To give you an example, for a £100,000 mortgage with an offset deposit of £20,000 your children will only pay interest on the remaining £80,000.
While the money in the offset savings account still belong to you, they help by reducing interest payments
As a parent or family member, you can help younger relatives by guaranteeing their mortgage debt.
There are other solutions available – like joint ownership or flexible family mortgages and new financial products come to the market all the time. If you are wondering what the best solution for you and your family could be, please get in touch with our friendly advisors. Our team have helped many first time buyers achieve their dream to secure the first step up the property ladder so we can offer you impartial advice on what the most suitable solution is for your circumstances and needs.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.