Buying a home for the first time can be overwhelming. Between scraping together a deposit, qualifying for a mortgage, and covering legal and administrative costs, first-time buyers face significant hurdles. Many young adults are leaning on the financial support of their families, often referred to as the “bank of mum and dad,” to help them get started. Whether it’s providing a gift toward the deposit or finding creative ways to increase mortgage affordability, there are more strategies than ever for parents to lend a hand
One of the most common forms of support is gifting money toward a deposit. A larger deposit not only improves a buyer’s chances of getting approved for a mortgage but also opens the door to better interest rates. While gifting is generous, it’s also important to understand the fine print. Lenders will want written confirmation that the gift does not need to be repaid, and legal documentation such as a deed of trust can protect your contribution—particularly if your child is purchasing a home with a partner. This document outlines who the money was gifted to and what should happen if the property is sold or the couple splits up. If the money is intended to be a loan, formalizing it with a contract avoids confusion later and ensures transparency with the lender, though doing so might impact your child’s borrowing power.
If you don’t have cash on hand, there are still ways to raise funds. For smaller sums, a personal loan could suffice. For larger amounts, you might consider a retirement interest-only mortgage, which allows you to access equity in your own home. You pay only the interest until you enter long-term care or pass away, at which point the loan is repaid through the sale of your home.
Parents can also consider family offset mortgages. These let you link your savings to your child’s mortgage, reducing the interest paid without giving up access to the savings entirely. This method offers a middle ground between gifting and safeguarding your future financial flexibility. Products like the Barclays Family Springboard allow parents to place money into a secured account that supports their child’s mortgage for a set period—often five years—before the funds are returned.
For buyers struggling to qualify for a mortgage based on income, a guarantor mortgage can be a powerful tool. This arrangement lets parents use their own savings or home equity as collateral, offering a safety net for lenders and increasing their child’s chances of approval. However, it also means you’re responsible for repayments if your child defaults, so it’s crucial to assess your own financial position carefully.
Another route is the joint borrower sole proprietor (JBSP) mortgage, which allows multiple people to be listed on the mortgage while only one person is listed on the property’s title. This arrangement helps boost affordability without adding to the parents’ taxable estate or triggering extra stamp duty fees for second-home buyers. JBSP mortgages are growing in popularity as more lenders embrace this flexible solution.
Joint mortgages are another option. Combining incomes can increase mortgage eligibility and unlock better deals. In this case, it’s important to legally define ownership—either as joint tenants, where both parties own 100% together, or tenants in common, where each person’s share is specified. Be mindful of the tax consequences, especially if the parents already own property, as this could trigger a second-home stamp duty surcharge and later, capital gains tax.
If your child is considering a new-build property, some developers offer incentives for parental contributions. For instance, Persimmon’s “Bank of Mum & Dad” program rewards qualifying family contributions with a £2,000 bonus after completion. These kinds of schemes can make supporting your child even more worthwhile.
Estate planning should also be part of the conversation. Gifts made during your lifetime can be exempt from inheritance tax, provided you live at least seven years after making them. Each person has an annual exemption of £3,000, and if unused, this can roll over for one year. This means a couple could gift £12,000 in a single tax year without triggering tax liabilities. You can also give up to £5,000 tax-free as a wedding gift to a child. These rules allow parents to reduce their taxable estate while helping their children build long-term financial security.
However, it’s essential to ensure that supporting your children won’t jeopardize your own financial well-being. A qualified financial adviser can use tools like cash flow modelling to help you understand how different gifting options impact your future. Additionally, make sure to update your will and keep documentation of any gifts or loans in a safe place.
Helping your child buy their first home is a meaningful and generous gesture—but it’s not one to rush into. Depending on your goals and financial situation, some options will be better than others. Whether you’re gifting money, acting as a guarantor, or exploring more complex lending arrangements, speaking with a mortgage broker, solicitor, or financial adviser will help ensure your support is structured wisely.
In the end, the goal is simple: giving your children the foundation they need to become homeowners, while protecting your own financial future. With careful planning and the right advice, you can do both.
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