The ever-popular notion of the ‘Bank of Mum and Dad’ is still growing and we are seeing more and more gifted deposits by family members in order to help the younger generation get onto the property ladder and purchase their first property.
Homeowners, particularly those who are mortgage free are planning to use investments as well as property to help benefit other family members move onto the property ladder. And, in recent years we have seen older homeowners are remortgaging to release capital in order to gift to a child or relative.
Releasing Equity
There are specific mortgages and lenders catered to the Equity Release side of mortgages. These deal the majority of the time with retired applicants who are looking to gift their equity and release the deeds of the property up to the lender. However, as the average age that people clear off their mortgage is 51, this does not apply to all people as Equity Release is often the last resort.
Releasing equity and the wealth inside your home by way of remortgage is a much more common practice. Most people do this in order to provide money to perform home improvements, extend their property or even invest in a buy-to-let property to form part of their pension pot or raise a new form of income.
We are now seeing more people remortgaging to release the equity to gift down to their children. Some lenders have restrictions on what you will be using the monies for once released. Your broker can help you find the right mortgage lender and product for you within their research of the market.
Age Shift
Research highlights that there is an increase in the number of people ready to help other family members too, not just their immediate children. In 2022 5% of people say they have already helped their grandchildren become first-time buyers with a further 20% of people saying they are definitely or probably going to in the future.
As the housing market shows, younger people tend to encounter more difficulties when seeking to enter the property market for the first time. If the ‘Bank of Mum and Dad’ or even the ‘Bank of Grandma and Grandad’ can now help alleviate the pressure of saving for a deposit, it will open more opportunities in lending to the younger generation.
We also see more lenders now offering ‘Joint Borrower, Sole Proprietor’ mortgages, mortgages that specifically allow a guarantor or supported income from a family member within their affordability calculators, ratios, and lending criteria helping bolster again this notion of shared family wealth.
If you are looking for help and advice arranging your first mortgage or remortgaging to release equity, please give us a call today.
