Why first-time-buyers might need their parent's help

It can be hard to get on the housing ladder

First-time buyer? Talk to the bank of mum and dad

A record number of people buying their first home are relying on money from their parents.

We know it's tough to get on the housing ladder, but latest figures show just how much things have changed for young people.

See also: Four ways to help in your struggle to save for a home

See also: Months shaved off time it takes couple to save house deposit


Only 31% of 25-29 year olds are homeowners, half the number 25 years before.

And those that are buying are doing it later and with the help of their parents. The government's Social Mobility Commission report also revealed a third of first-time buyers turned to family members for a gift or loan so they could afford a home – the largest ever number.

How parents can help

If your parents are willing to help you out with the mortgage, be clear if it's a loan or a gift. If you're borrowing the money from them make sure everyone knows when and how you'll be paying the money back.

There are some mortgages which have been designed to include contributions from the Bank of Mum and Dad. It's worth talking to your mortgage advisor about their suitability as they do have some constraints.

And if they want to buy the house with you, you'll likely need to factor in an additional 3% on Stamp Duty.

It's also worth bearing in mind there could be some tax implications for your parents.

Boosting your deposit

Whether you're relying on help from your folks or not, you'll still want to put as much of your own cash into your home as possible. The higher your deposit, the better Loan to Value (LTV) you can get from lenders, and that often reduces the monthly interest rate you'll be charged.

A trick to help is to get into a savings habit. If you work out how much you can save each month, and regularly put this aside, you'll find saving easier. You can also take a deep look at your finances with a budget planner to see if there are places you can cut back – and put more towards your deposit.

You also need to think about where you put your savings. The Help to Buy ISA can net you a 25% bonus, up to a maximum of £3,000, so could be a real help. The new Lifetime ISA - the first of these will be available in the summer - works similarly.

Don't forget the other costs

The deposit is just one cost when buying your first home. You'll also need to make sure you can afford the monthly mortgage repayments – and lenders will want to look at your bank accounts to prove you can.

Then there are numerous fees on top. These extras include:

  • Mortgage arrangement and valuation fees
  • Stamp Duty (or Land and Buildings Transaction Tax in Scotland)
  • Solicitor's fee
  • Survey cost

Plus, you'll need to budget for moving costs and find money for any new furniture, white goods and decorating you require. And don't be surprised if you come across some unexpected repairs that need to be paid for.

You might have installation costs for your phone, internet and TV, while Council Tax might be higher than where you previously lived. Add on buildings insurance (your lender will require this), and your monthly bills could be higher than you expect.

This article is provided by the Money Advice Service.



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