Kirkwood Homes Blog

Buying with a little help from the bank of mum and dad

You think you’re the only one excited about moving out of the family home? Think again. Your mum and dad have most likely been counting down the years, months and days until you were finally ready to take that next step and flee the nest.

Of course, parents love and raise you. But after 18 odd years of cleaning up after you, cooking for you, sharing the remote control with you and acting as your own personal financial advisor and bank, they’re not trying to keep you at home for much longer. However, they also want to be with you every step along the way – see you making the biggest investment of your life, and watch as their baby becomes a fully-fledged grown up.

Saving for a deposit is tricky, but with mum and dad happy to help things can look much more optimistic. In the current property market, the bank of mum and dad, or even granny and granddad, has helped many people to buy their first home.

The easiest way for parents to help you is to simply gift the money needed for a deposit. Mortgage lenders prefer deposit money to be a gift and usually ask for a letter from parents confirming that the money does not need to be repaid. There are some points on inheritance tax that should be considered and this can be discussed with your solicitor or mortgage advisor.

Another option is if your parents want to loan you the money, your mortgage lender will take the loan repayments into account when working out how big your mortgage can be. This means you may end up being able to borrow less than if the money had been a gift. Parents should also note that when you repay the money, they will have to pay income tax on any interest they charged you.

Approaching parents about helping you to buy your first home should be done carefully and with a mature mind-set. Consider the options available, and perhaps look at pulling together a proposal for them that can be discussed to suit both needs.

Being mature about the process and being open any kind of support and help your parents can provide you with is the best way to handle what can sometimes feel like a tricky conversation. Ultimately, your parents want to see you do well and help you in any way possible. However, offering to do the dishes once in a while, taking the dog out or making a cup of tea once in a while, is sure to help you in the long run!

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