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High house prices, tough affordability checks and the need to save a large deposit have long been cited as reasons why first-time buyers struggle to get on to the property ladder. These difficulties have led to many would-be buyers relying on the so-called 'Bank of Mum and Dad'.
If you're looking to help your child buy a property, the good news is that there are several routes available - including gifting or loaning a deposit, acting as a guarantor for their mortgage or taking out a mortgage together.
In this guide, we explain the different ways you might be able to help, and provide 10 top tips to help you make the right decision and protect your finances.
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Check out our 90-second video below for the basics - we go into more detail on each option further down the page.
Gifting or loaning a deposit is one of the most common ways parents help their child buy a home, but there are some rules you'll need to adhere to.
Firstly, your child's mortgage lender may require proof that the money came from you. If you're gifting the cash, you can usually provide a letter confirming this and stating that it won't need to be paid back. If you are lending the money, you'll also need to confirm this as the lender will want to factor repayments into its affordability calculations.
You may be required to sign a declaration that you have no legal interest in the property, and your child's conveyancer might request bank statements as proof of the gift or loan as part of their money-laundering checks.
Your child might need to pay inheritance tax on a gifted deposit if you die within seven years of handing over the money.
If you want to help your child buy a home but don't have enough savings to give or lend them the cash, there are several options you can consider.
A guarantor mortgage involves you using your savings or your home to help your child get a mortgage.
By putting down money or property as collateral, you'll be able to reduce your child's risk profile, making it easier for them to get a home loan.
The drawback with guarantor mortgages is that if your child defaults on their mortgage payments, you'll be responsible. Guarantor mortgages also often come with higher rates than traditional deals.
A joint mortgage involves both you and your child being named on the mortgage and the property deeds.
On the plus side, it means you can use your income and savings to help your child buy a home.
On the other hand, you'll be jointly responsible for the mortgage payments and will need to pay second property stamp duty rates if you already own a home.
JBSP mortgages are much like joint mortgages, with one crucial difference.
Both you and your child will be named on the mortgage, but only your child will be named on the property deeds. This means you'll be able to avoid the stamp duty surcharge.
Lenders are more likely to accept applications where the child can prove their earnings will rise significantly in the future, and older parents may struggle to get accepted.
If you have a mortgage on your own property, you could consider freeing up cash by remortgaging for a larger sum.
To take on any extra borrowing, you could theoretically increase your mortgage term or the size of your repayments.
It's important to think carefully about your circumstances and take financial advice before going down this route, as increasing your outgoings could have an effect on your standard of living and retirement plans.
If you're going to give money to your child, you'll need to understand the taxation rules around gifting, as parents handing out large lump sums could face a hefty inheritance tax (IHT) bill.
You're allowed to give away up to £3,000 a year without it counting towards IHT - and you can backdate this by a year, too, so in theory a couple could give away £12,000 in a tax year if they haven't gifted anything the previous year. Separate individual gifts of up to £250 are also allowed.
On top of this, it's possible in some cases to draw on unused income to make regular gifts if doing so doesn't affect your standard of living.
Beyond these exclusions, your child might need to pay inheritance tax on any gifts given to them if you die with seven years - though this depends on their cumulative value.
If you decide to help your child buy a home, it's likely you'll want to maintain an element of control, if only to ensure your money isn't wasted.
Here are 10 tips for parents who want to help their child buy their first property without causing conflict or financial difficulties.
There are thousands of mortgages on the market, and you'll want to help your child find the best possible deal. With this in mind, consider talking to a mortgage broker to discuss your options.
If you buy an official share in the property, don't forget to update your will to reflect what you'd like to happen to it upon your death. Our will-writing guide explains how to validate, store and update your will.
If you're named on the deeds, you may be liable for certain taxes associated with the property. Read our guides to how rental income is taxed and inheritance tax on property for information on your potential tax liabilities.
You need to make your child aware of whether you are making a gift, a loan (with or without interest) or an investment. It might be an awkward conversation, but it will make things much easier in the long run.
If your child feels embarrassed or guilty about accepting money from you, this could make them less likely to tell you if they're worried about meeting their monthly repayments. Encourage an open dialogue and make it clear that they can come to you if they get into difficulties.
Get a legally binding agreement drawn up by a solicitor. To safeguard a loan or investment, make sure it stipulates the nature of any arrangement.
Even with a legal agreement in place, your child could potentially sell the property without your consent. If you're concerned about this and want to avoid it happening, complete Land Registry form RX1.
If you're buying jointly, make sure you talk about the home improvements you think the property could benefit from - your ideas might be very different from your child's.
It's essential to be honest about your financial circumstances. Don't exaggerate your income to secure a larger mortgage.
Our how much mortgage can I borrow? calculator will give a rough idea of budget, but for an accurate figure it's best to talk to a mortgage broker.
Don't put yourself in a financially risky predicament by overextending yourself, and don't assume that mortgage interest rates will remain at their current levels.
Use our mortgage repayment calculator to see how different interest rates would affect your monthly payments.
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