Cash advice
Until 31 March 2021, stamp duty has been cut for all properties costing up to £500,000 but getting a mortgage is harder. If you want to help your kids purchase a property, here’s what you need to know…
1 LIFETIME ISAs
These are available to anyone aged 18 to 39, are tax-free and allow savings up to £4,000 each year – the government adds 25 per cent to whatever is saved. The ISA can be used towards a deposit on a first home, or towards a pension, but if the money is withdrawn for any other reason, there is a penalty charge. 2 HELP TO BUY LOANS
These can make a new-build home more affordable. The government lends first-time buyers up to 20 per cent of the value of the property (up to 40 per cent in London) interest-free for five years. Alternatively, shared ownership schemes allow buyers to purchase part of a property and rent the rest from the local authority.
3 SAVINGS ACCOUNTS
You can use your savings to help with a deposit through a family mortgage. A parent or grandparent puts money into the savings account linked to the mortgage, so the buyer can get as much as 100 per cent of the price of their home in the form of a mortgage. The money in the savings account acts as a deposit, and provides a guarantee for the mortgage provider. Go to unbiased.co.uk or vouchedfor. com to find a mortgage advisor.
4 BOOST MORTGAGE APPLICATIONS
With a guarantor mortgage, a parent or grandparent promises to cover the mortgage repayments if the home buyer fails to pay. If you go down this route, you’ll have to put up something as security (typically your own home or savings) to reduce the deposit. This isn’t a step to take lightly, as you could be putting your own home at risk. Alternatively, look into a joint mortgage. ‘An increasing number of lenders will allow the mortgage to be held in joint names but the property to be in one name only, so the parent need not be on the title deeds and can sidestep some tax issues,’ says David Hollingworth from broker L&C Mortgages.
5 LEND A HAND
Most of us don’t have large amounts of spare cash to hand out – but you could loan money you do have to your children or grandchildren. Just make sure the repayment terms are clear. Also, it’s worth noting that high repayments could affect their ability to get a mortgage.