The bank of mum and dad
Parents now fund more than a quarter of house purchases as young people and first time buyers struggle increasingly to get on the housing ladder.
The so-called 'bank of mum and dad' is where parents provide the money to allow first time buyer to get on the property market. The system has become the equivalent of the ninth-biggest mortgage lender in the UK, lending nearly £6 billion this year, according to research from Legal and General.
Some of the advantages of borrowing from the 'bank of mum and dad' include low or no interest rates and long repayment periods, and so it is no surprise that parents have become major players in the housing market. It is safe to say that parents play a vital role in helping young people to take their early steps on to the housing ladder.
The majority of people will go down the route of a gifted deposit where the buyers' mum and dad will give a certain deposit as a gift. However, there are other ways in which the parents' donation can actually keep on earning interest for them.
A deposit can initially be gifted to provide a minimum of 10% of the property's price as security. The deposit will then be invested by their lender and the interest will be added to the amount of gifted deposit. The donor will eventually receive their money back with interest as long as the mortgage repayments are kept up.
As Independent Mortgages Advisers, ESPC Mortgages can help with all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Pop in for a no obligation chat with myself or another member of the team at our Edinburgh Information Centre or give us a call on 0131 253 2920.
The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain.
The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.