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The Bank of Mum and Dad

The recent news that the “Bank of Mum & Dad” will in future be involved in a quarter of all property transactions has certainly grabbed the headlines.

                  

The recent news that the “Bank of Mum & Dad” will in future be involved in a quarter of all property transactions (according to life insurer Legal & General and the Centre for Economic and Business Research) has certainly grabbed the headlines.

The reality is that first-time buyers are finding it tougher than ever to get their feet on the housing ladder. Even Mum & Dad often cannot come up with all the solutions. That’s the bad news.

The good news is that we can help. Father and Daughter

 The first time buyer should look beyond simple headlines to try and find practical, concrete solutions to the problem of accessing a decent deposit and a manageable mortgage. In particular, today’s 25-30 year olds have told us that they do not want to adversely impact their parents’ finances if they lose their job or the value of their property falls even a little.

The Family Mortgage, launched in 2014, better serves the first time buyer by allowing other family members to also help raise a meaningful deposit, rather than just Mum and Dad. 

In particular, it also comes with a built-in six months payment waiver if you lose your job through no fault of your own.

And there is the flexibility to use cash held in a savings account, to offset this cash against the mortgage, as well as the ability to use the equity in a family member’s home.

We can also offer you and your family a leg-up with our Helping Hand Saver account which offers relatives a uniquely easy way of putting aside some money to invest for the future of the next generation. 

So while some lenders make the news with attention grabbing headlines, before going to parents cap in hand, we say that the first time buyer ought to consider whether their lender, can like us, offer the following:

• A built in payment waiver – a facility to meet the mortgage payments if the borrowers lose their jobs, rather than expecting family member’s to.

• Accepts gifted deposits so the first time buyer doesn’t have to try to pay rent and save the deposit at the same time.

• A family inclusive and friendly offering – different family members can all do their bit (e.g. grandparents could put up cash, parents can offer a charge over property, and both families can help if it’s a joint purchase). This is not just mum & dad, but auntie, uncle and grandparents too.

• A stamp duty friendly loan that is in the FTBs name(s) so the 3% charge for second properties is not incurred by the family members helping.

• The ability to offset a loan where cash is used as security, with payments calculated on the net loan giving a real cash benefit to the borrower.

Using the options available, a family could help a young person into their own home using a relatively small amount of cash:  a gift of the 5% deposit and a charge over their property for 20% could get a first time buyer immediately into their own home, leaving the family cash intact.

The Family Building Society has led the way in helping first time buyers into their own homes – and has been doing so since July 2014 when we launched the pioneering Family Mortgage.

Find out more about our family friendly mortgages for first time home buyers here

 Alistair Nimmo

   

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Family Building Society
Ebbisham House
30 Church Street
Epsom
Surrey KT17 4NL
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