First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.3bn this year, according to a report from Legal & General. This equates to being the equivalent of the country’s tenth biggest mortgage lender!
The average parental contribution for homebuyers this year is £24,100, according to L&G. This is up by more than £6,000 compared to last year.
The report also suggested that thousands of UK buyers were reliant on their parents to either get onto the housing ladder in the first place, or upgrade to a larger home. Almost a fifth of those who said they had, or would help a family member buy a home, said it was because they felt it was their personal responsibility to help out.
The financial services firm also warned that parents’ generosity could hurt their standard of living in retirement.
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. This includes ‘Joint Borrower, Sole Proprietor’ arrangements.
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 substantial, 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.
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 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.