HELP YOUR CHILDREN

TELL THEM ABOUT LISA

The LISA (Lifetime Individual Savings Account) came into force in April and helps anyone under 40 to save for their first home or for retirement. If your children are saving to get on the housing ladder, it’s a pretty good deal. They can save £4,000 a year tax free and the Government will add a 25% bonus (also tax free) when they are ready to buy their first house. They must open a LISA before their 40th birthday and can continue paying into it until they reach 50. If your child opens the account on their 18th birthday and pays in the maximum £4,000 a year, that’s a nifty bonus of £32,000 towards their first home. They can use it to buy a house worth up to £450,000.

THE BANK OF MUM AND DAD

This year, parents lent over £6.5bn, according to research from Legal & General. That ranks the Bank of Mum and Dad in the UK’S top 10 mortgage providers. But there are better ways to help than giving or lending money. Jeremy Duncombe, of Legal & General Mortgage Club, says parents should look at initiatives such as the Barclays Springboard or Nationwide’s Family Deposit Mortgage. Barclays Springboard, for example, does not require a borrower deposit as long as parents can provide 10% of the property’s price as security, which is put into a three-year fixed-rate savings account. It is returned with interest as long as repayments have been kept up.

You could also consider a guarantor mortgage. You guarantee your child’s mortgage debt and they will be loaned more money than they might otherwise have been and at better interest rates. However, if your child misses a payment, you’ll have to cover the cost, so think this option through

[continued from previous page] very carefully! This shouldn’t affect your credit rating, so long as payments are met.

WHEN IT PAYS TO RENT

If your kids are renting, they can use their payments to help boost their credit score using The Rental Exchange scheme, part of an initiative by credit reference agency Experian. They pay their rent via a third party agency called Credit Ladder, which lets Experian know payments are made on time, boosting their credit score.

GH TIP: Under the Government’s Rent A Room scheme, you can earn up to £7,500 per year tax-free from your spare room – including if you rent to a family member.

SHARING THE COST

A shared ownership scheme allows the purchaser to part-rent and part-buy a home, reducing the size of both deposit and mortgage. Properties can be bought via housing associations and you can purchase between 25% and 75% of the full price. Rent is then paid on the remainder. The property will be leasehold, so expect a service charge. And only some providers offer mortgages for shared ownership schemes. A greater share of the property can be purchased when finances allow. Visit helptobuy.gov.uk/ shared-ownership/ for more information.

Giving your parents a home in yours can be a great way for them to spend time with the grandchildren

ADAPT THEIR HOME

If your parents need help with repairs and maintenance, contact a Home Improvement Agency (HIA). These help older or disabled homeowners and private tenants arrange finance for repairs and adaptations. They also provide information on finding a builder and getting the work carried out.

ROOM FOR TWO MORE

Giving your parents a home in yours can be a great way for them to spend more time with grandchildren and for you to be on hand. But you need to think through the implications carefully. Consider what impact it might have on any benefits they receive, and whether you will be expected to look after them if they need more care. You also need to decide how they will contribute towards the mortgage and bills.

Contact a HIA (as above) to see if you can get help with any necessary adaptations.

TIME FOR RETIREMENT HOUSING?

If your parents can’t (or don’t want to) stay in their home, one possibility is sheltered housing. It’s a broad term that covers everything from retirement villages to housing where extra care is available. While villages are likely to be remote from town or city life, most are built close to social, transport and shopping facilities. Some sheltered housing schemes may have a permanent warden but all should provide 24-hour emergency help through an alarm system. Accommodation is usually self-contained, but some schemes have communal areas, such as a laundry room and garden, and there may be social events. Lots of retirement housing is rented, but there are properties available to buy. Make sure you only buy from a builder registered with an accredited body, such as the National House-building Council. A good place to start your research is ageuk.org.uk

WHEN MORE IS NEEDED

Extra-care schemes provide a more intensive level of support than traditional retirement housing for people who need some personal care but who are otherwise able to live safely on their own. There will usually be at least one member of staff on hand 24 hours a day. There’s a useful fact sheet on extra care at housingcare.org.

THEY CAN SHARE, TOO

Over-55s may be able to get help from the Older People’s Shared Ownership scheme. Through it, they can buy up to a maximum of 75% of a property, and they’ll have to pay rent on the remaining portion. A 5% deposit on the portion they are buying is payable up front and, when it’s sold, the housing association will be paid a percentage for the share it owns.

To be eligible, purchasers must have a combined income of less than £80,000, (or £90,000 in London). They can be first-time buyers, previous owners who can’t afford a new home or shared owners looking to move. Visit ownyourhome.gov.uk.

A LAST RESORT?

One way to raise capital without moving is to release equity from a property. With a lifetime mortgage, a loan is taken out on a fixed interest rate, secured against the property. It does not have to be repaid until the borrower sells, usually to go into care, or dies – at which point the house is sold and the money is used to repay the loan. Whatever is left goes to beneficiaries. Some find this a useful way to fund retirement, but it is increasingly used to help children or grandchildren buy their first home.

Equity release should be a last resort when there are no other options available. It’s often costly and will likely leave the owners unable to leave their house to children, should they want to.