Ben Thompson, Deputy CEO at Mortgage Advice Bureau, looks at other ways parents could help their children get onto the property ladder beyond gifted deposits.
With more people than ever looking to buy their first property, many are looking at other ways to help speed up the process of saving for the deposit.
Whichever route first-time buyers choose to go down - whether through help from the Bank of Mum and Dad or support with co-signing the mortgage - it’s always helpful to know what options are out there to help make this happen.
Ben Thompson, Deputy CEO at Mortgage Advice Bureau, comments: “Parents always wish to help their children, and we often speak with first-time buyers who are planning on buying their first home with the help of the Bank of Mum and Dad.
"One of the most popular routes for parents wishing to help their children onto the property ladder has been through a gifted deposit. This is where the parent provides some or all of the money needed for a housing deposit.
“However, our data shows that in recent years, using the Bank of Mum and Dad has become less popular. So far, there has been a 2% drop from 2022 through to 2024, with this likely in part due to the challenging economic climate of the past few years.
“While most parents will want to help their children make their homebuying dreams a reality, it’s not always financially possible, especially if you have more than one child. However, there are other ways that parents could choose to help their children.
"This includes being a joint borrower sole proprietor, a guarantor, or using a family boost mortgage. For first-time buyers looking to get onto the property ladder, or parents who want to help their child(ren) climb the next rung, speaking to a broker can help to ensure they’re mortgage ready.”
Other ways parents could help their children get onto the property ladder
1. Become a joint borrower, sole proprietor
Parents who might not be in a position to gift the full deposit, or even part of one, could consider becoming a joint borrower sole proprietor. This is a mortgage where several people can be listed on the mortgage application. These people are known as ‘joint borrowers’. Of these, only one or two will own, live in, and legally own the property. These are known as the ‘sole proprietor’.
Having more applicants on the mortgage means more incomes are taken into consideration. This can help improve affordability and the chances of potentially buying a better property. This type of mortgage could be a benefit for first-time buyers who are in need of a short-term solution to help them get on the property ladder.
For example, if a young person at the start of their career wanted to get on the property ladder but had a lower income, their parents could be added on to the mortgage as joint borrowers to increase affordability for the mortgage.
In a few years’ time, if the child’s circumstances have changed (e.g. they’ve progressed in their career and have a better salary), they could apply to remove the joint borrowers from the mortgage.
2. Be a guarantor
For many first-time buyers, the biggest hurdle they face is finding the money to put down as a deposit. Not having a deposit can put many lenders off, meaning they could struggle to get a mortgage offer accepted. However, by being someone’s mortgage guarantor, you could still help them get the keys to their dream home.
There are two ways a person is able to be a mortgage guarantor. They can use their savings to offset the mortgage, or they can use their own property to offset the mortgage.
This can be a great way to help young people get on the property ladder, but make sure you’re clued up on exactly what it involves, as there are some risks that you need to be aware of which we have outlined in our guide to help families.
3. Consider alternative mortgage options
There are a number of alternative options that help family members help their children get on the property ladder - particularly those who are struggling to save for a deposit. This includes being able to put the money into a specific savings account, which will act as security for the mortgage.
Speak to a broker about the mortgage options available with family support, as they will be able to tailor advice to your individual circumstances.
