Parents can help their children into property
Added on by Etairos Accounting
It is a sign of the times that unfortunately too many young people who leave home and are looking to secure their future by getting into the housing market, find it difficult to get a deposit together. The higher cost of getting into the housing market, which has been driven in part by a shortage of land, paying higher rents, and subdued wages growth all play their part.
As a result, quite often parents have to give their children a financial "leg up" into the housing market, helping them bypass strict credit policies and get the finance they need to assist with deposits and fees. Until just a few years ago, lending guidelines were a little more flexible and potential purchasers could buy a property with very little deposit. But there are options.
For parents wanting to assist their children to buy a home, but who may not have access to much cash, some banks provide what is known as a "family pledge loan". This is a way for parents or other family to help with the purchase of a home, without providing cash for a deposit. Instead, they use their own home's equity to provide security for a portion of the loan amount. This amount is limited to security amount offered (usually 20 per cent) and not the entire loan amount. There has been a growing interest in family pledge loans, as parents look for alternative ways to help their children get into housing, other than with large cash outlays, which may not be desirable for those nearing retirement. These loan products offer a way for them to assist them as home owners in a tight credit market and avoid the cost of Lenders Mortgage Insurance. It means children can get into property quicker instead of saving for four or five years, by which time the market may have moved on.
Call us for more details or help with a Family Pledge Loan
