Homebuying With Family Gifts: What you need to know
With high property prices and big deposit gaps, many young people are still struggling to buy their first home. One increasingly popular way for first-time buyers to get onto the property ladder is homebuying with family gifts. In this guide, I explore the different types of family-assisted mortgages available, including Helping Hand, Family Springboard and JBSPs.
How Can Family Gifts Be Used Towards a Home Deposit in the UK?
Many older parents are looking for ways to support the next generation without simply “giving away” their life savings. However, there are specific family-assisted mortgage products and structures that can be used to help first-time buyers. Parents may need to provide confirmation letters and sign certain declarations.
Barclays offers the Family Springboard mortgage, where a family member (the “helper”) puts 10% of the property price into a savings account. The buyer gets either a 95% or 100% mortgage. The helper’s money is locked away for 5 years. However, this sum earns interest and is returned, as long as the mortgage payments are kept up.
You could also consider Nationwide’s Helping Hand mortgage. This mortgage allows first-time buyers with specific income levels to borrow up to 6x their income and up to 95% loan‑to‑value.
How Much Can a Family Member Gift for a House?
There are inheritance tax considerations for family gifting, so you’ll need to be aware of tax allowances. You’re currently allowed to gift £3,000 a year without this being added to your estate value. But if you gift higher than £3,000, then the 7-year inheritance tax rule applies.
If you’re unsure about gifting, you could consider a Joint Borrower Sole Proprietor (JBSP) to support your child’s homebuying journey. The parent is added to the mortgage application and affordability checks are based on the parent’s income. The parent doesn’t need to be added to the property deeds, so it helps to avoid the second home Stamp Duty surcharge.
JBSP deals look at the parent’s age, which can shorten the mortgage term. There are also “reverse” JBSP structures that focus on the buyer’s career path and the term. The Family Assist Mortgage offered by Buckinghamshire Building Society bases affordability on the younger applicant’s age and income. The plan is aimed at adult children taking on the mortgage in the future and is often used to help parents to stay in the family home.
How Can Parents Help Their Child to Buy A House With Low Income?
Parents with low savings can become “guarantors” to help adult children get a mortgage. This reduces the child’s risk profile from the lender’s perspective. However, if the child defaults on their mortgage payments, the parent becomes responsible.
It’s also worth considering “no-deposit solutions” such as 100% Mortgages. Skipton Building Society offers the Track Record mortgage. Instead of a cash deposit, affordability is based on the buyer’s history of on-time rent payments. You must be a first-time buyer to be eligible with 12 months of clean rental history. Although gifts would not be needed for the deposit, families could still gift towards smaller homebuying costs, such as surveys and legal fees.
Mortgage Advice – Gifting Money for Property
If you’re looking at homebuying with family gifts, then it’s essential to get mortgage advice from a qualified mortgage adviser. From Helping Hand to Family Springboard and JBSPs, there are a variety of mortgage products and structures available.
Whether you’re a parent looking to help a child or a first-time buyer with a cash gift, I’ll guide you every step of the way. I love helping people buy their first home and I have access to over 90 lenders. I’ll help you find the right family-assisted mortgage for your situation.
Are you thinking of using a family gift to buy your first home? Book a call today
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Sources:
https://www.bbc.co.uk/news/articles/cwy7n9441r5o
https://www.barclays.co.uk/mortgages/family-springboard-mortgage/)
https://www.gov.uk/inheritance-tax/gifts
https://www.skipton.co.uk/mortgages/first-time-buyers/track-record-mortgage
https://www.bucksbs.co.uk/mortgages/prime-purchase-and-remortgage/
