Ask the Team

Question:

Online Enquiry
An enquiry has been made on the Property Price Advice website with the following details.

Name:
Claire – Oxfordshire

Enquiry:
What can I do to help my daughter buy a house?  She’s a first time buyer and finding it difficult to get a mortgage.  I’d like to help her but where will that leave me in terms of return and investment?

Answer:
There are a lot of options on offer for first time buyers if you shop around but it is very difficult to get home loans these days unless you tick all the boxes in terms of deposit, stable employment and track record.  What you’re interested in doing is probably covered by a Guarantor Mortgage but that has its drawbacks for you, the parent, so consider carefully before you agree.

A guarantor mortgage is where a parent/relative agrees to guarantee the mortgage against default.  The only thing is that some mortgage lenders want the guarantor to cover the whole amount on the property.  The nice part is that once your daughter is able to afford the monthly repayments herself you can be released from the agreement.

While all 100% mortgages have been pulled from the market recently you can apply for one with a guarantor mortgage but the parent needs to prove that their own mortgage is ending or, that they can cover the cost with their income or savings if necessary.

It would be a good idea to buy the property for your daughter to ‘rent’ back from you instead, until she is on her feet financially.  If it were a two bedroom property she could then share with a house mate and derive income to pay you the rent or the mortgage when she takes it over.
There are other issues to take into account though such as inheritance tax and capital gains which could impact on you buying another property to eventually pass to your child.  Please take legal advice on this before entering this kind of agreement.