Four ways to help your children buy property

As the cost of housing has gone up, a growing number of parents are offering to help their children buy their first property. So, if you’re a parent looking to provide financial support to your child, here are some of the different options you might wish to consider.

Gift them a deposit

One way many parents choose to support their children to get on the property ladder is by gifting them the money for a deposit. However, some traditional lenders look unfavourably at gifted deposits, so it’s important to understand what the options are.

Any time a traditional lender looks at an application for finance they want to see that the borrower has a good savings history. To do this they require a certain amount of the deposit be held as ‘genuine savings’.

This amount can vary bank to bank and to be classed as ‘genuine savings’ the money has to have been in the borrowers account for more than three consecutive months.

Some home buyers can find themselves stuck when they receive a gifted deposit as they find out it won’t be recognised by the bank as genuine savings.

Loan them a deposit

Not all deposits have to be gifts. Some parents choose to loan their child money for a deposit on the condition that it is paid back. Again, these types of deposits are looked at differently by traditional lenders, so it pays to understand the implications if you intend to take this route.

The good news for first home buyers with either gifted or borrowed deposits is there are flexible lenders in the market like Liberty that will accept both. To learn more about our home loan products click here.

Buy a house together

For some parents, buying a house together with their child is the preferred option. Potentially this can strengthen the application for finance, and also mean the deposit and stamp duty commitments can be shared. Plus, all parties get to share in any capital gains should the property increase in value.

While this may seem like a straightforward option, some lenders may look at parental borrowers less favourably, especially if any parties to the loan are nearing retirement and no longer expected to earn wages.

Because these types of loans are considered by lenders on a case-by-case basis it pays to get good advice.

No matter how you choose to help your children get a foot on the property ladder, the first step is to talk to a Liberty Adviser about the different options and which one might work for you. You can find your nearest Liberty Adviser here.