11 May 2017
The Bank of Mum and Dad is huge!
First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.5bn this year, according to a report from Legal & General. This equates to nearly 25% of
UK property transactions and
similar to being the country's ninth biggest mortgage lender!
The report suggests that the 'millennials' are the biggest recipients with 70% of the funding going to people under the age of 30.
Although, a report from Prudential has also suggested that Mum and Dad worry about how their money is being spent and would like control over the gifted funds. One in four worry it could be given to their children's spouses in the case of divorce and one third are mindful their children could squander the gift altogether!
First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages.
We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:
Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price. This discount can be up to £78,600 (£104,900 in London) and applicants must have been a public sector tenant for at least three years. Some lenders will allow borrowing of up to 100% of the purchase price. If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period. There are other schemes available to housing associations and the Government has plans to extend Right to Buy to more housing association tenants.
Shared Ownership Schemes are normally provided through housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.
Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past. So always seek advice.