First-time buyer help from parents How parents can help first-time buyers

There are a number of mortgage products that allow parents to help their child

Inflated house prices and the credit crunch have made it harder than ever for first-time buyers to get a mortgage and climb onto the property ladder.

If you want to help your child buy a home, there are several financial products you can consider if you don’t have enough savings to spare.

Remortgaging

If you have a mortgage, think about remortgaging to increase your loan. This would involve arranging a new mortgage with your existing provider or transferring to another lender.

Your mortgage term would either be increased to absorb the additional borrowing or your repayments would rise. To get an idea of the current rates, take a look at the remortgage tables on the Which? Mortgage Advisers website.

A further advance from your existing lender is another form of loan you could get that would be secured on your home.

Make sure you consider the impact increased borrowing would have on your own standard of living and your retirement plans.

Guarantor mortgage

If your child can’t get a big enough mortgage, you could consider a guarantor mortgage. The amount they could borrow would also take into account your income and assets.

You would be guaranteeing to meet any repayments should your child fail to do so, which could be risky, especially if you still have a mortgage on your own home.

Joint mortgage

For working parents, this could be a viable option. A joint mortgage considers both your and your child’s income as well as any money outstanding on your own mortgage.

It allows you and your child to be named on the mortgage agreement and on the deeds, providing you with some power over any future transactions but you would be liable if your child stops paying their share of the mortgage.

Family offset mortgage

Your savings are balanced against your child’s debt, so the amount they owe and pay interest on is reduced.

For example, if you have £30,000 in savings and your child has a £110,000 mortgage, they'll pay interest on only £80,000. You won’t receive any interest on your savings but this means that you won't be paying any tax on the interest either. This is particularly beneficial to higher-rate taxpayers.

Buying student accommodation

Buying a property for your child while they’re at university could mean saving on the rent they would otherwise have to pay for accommodation. It could even bring in an income from renters, which would help to cover the mortgage.

However, as your child would probably have to rent out the other rooms, usually to friends, they - and you - could be vulnerable if the lodgers fail to pay.

You should also consider whether your child is mature enough to deal with their own home at 18 years old and what you would do with the property when your child leaves university, as most students don’t live where they study after finishing their course.

Shared ownership and shared equity

If you are unable to help your child onto the property ladder, there are affordable housing schemes that might be able to help them buy a home. Read our guides to shared ownership and shared equity for more information.

Choosing the right option

We believe you should take independent advice before choosing a mortgage. The Which? Group offers an independent mortgage advice service that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased website.

If you're looking to find out what your repayments would be at different interest rates, or want to get an idea of how much you could borrow, try using the mortgage calculators offered by Which? Mortgage Advisers.