How to help your kids to buy a home
Parents now help fund one in four house purchases in the UK.
This year, the Bank of Mum and Dad will hand over more than 6.5billion to help 300,000 children get on the property ladder, say insurers Legal General.
The figures reveal just how reliant young people have become upon their parents to be able to purchase a home as house prices soar and stricter lending rules make it trickier to borrow from banks.
Help at hand: This year, the Bank of Mum and Dad will hand over more than 6.5bn to help 300,000 children get on the property ladder, say insurers Legal General
But while many parents will naturally want to help their children, they must be aware of the pitfalls. You could end up on the hook for a son or daughter's mortgage if they can't keep up with payments.
You could also be hit with a hefty tax bill if you take the wrong type of pandora australia contact home shop pandora charms loan. And if you hand over cash for a deposit, but then need it yourself for care bills or an emergency, it may be almost impossible to get it back from your child.
Banks now offer a growing range of family home loan options to make it easier for young people to buy, and it's vital that you do your homework before rushing in.
It might seem unlikely at the time that your child could divorce or fall into money trouble, but sadly, it's not that unusual.
Andy Mason, of Halifax Mortgages, says: 'People must consider carefully the financial implications of helping a child buy a house. What would happen if you suffered ill health and were unable to work or needed to pay for care?
'Can you definitely afford the repayments when you are retired if the debt you have taken on falls back on you? These are vital considerations and, in some cases, it's worth seeking legal advice.'
DRAW UP A PROPER LOAN AGREEMENT
Parents who help their child with a deposit now hand out an average of 21,600.
Banks will ask where to buy pandora bracelets cheap borrowers where their deposit came from and if it was the Bank of Mum and Dad, the lender may ask parents to sign a form confirming they are not expecting this money back.
If the parents expect it to be repaid, the borrower will have to tell the bank how much they will be repaying their parents each month, as this affects the size of the mortgage they can afford.
If a parent loans cash, it might be worth drawing up a legal agreement, setting out over what period they expect this to be repaid.
It may sound a little too formal for you but one Money Mail reader regrets failing to take these precautions.
The 64 year old remortgaged his home 11 years ago, so he could give where to buy pandora bracelet charms his son a lump sum for a house deposit.
Banks now offer a growing range of family home loan options to make it easier for young people to buy, and it's vital that you do your homework before rushing in
The son agreed to repay the debt by monthly direct debit. However, he then got married and divorced twice, meaning he was not able to repay the debt as quickly as expected and, earlier this year, he stopped paying altogether.
The reader says: 'My mortgage is interest only, so the sum he borrowed is still outstanding. I am 65 next year and will still be paying my mortgage off, but I must also now find my son's sum.
'I want to make other parents aware of the pitfalls that can arise from doing what at the time appears to be the correct thing by your children. With hindsight, I should have arranged something more legally binding so I had some comeback to force him to pay.'
One solution is to put a second charge on the child's property.
A charge means that, if the house is sold, you are second in line after the mortgage lender to get your money back.
The deposit refunded to them should include interest at a rate agreed by the family. Parents can decide to remove the charge at a later date.
A charge can be arranged via a solicitor, but borrowers should check their lender allows these.
Banks are often wary of them because, in the event they need to repossess the property, they do not want parents asking for their stake back.
Coventry Building Society, for example, says money given by parents for house deposits must be 'genuine unconditional gifts' and must 'not be secured by a charge'.
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