Getting on the property ladder

8th August 2017

Help with getting onto the property ladder

With increasing numbers of people struggling with raising a mortgage deposit to purchase their own homes, many are having to turn to their parents, relatives or close friends, to help get them onto the property ladder. If you are thinking of accepting financial help from a family member or close friend to help fund your home purchase, there are a number of ways in which they can help, which we have handily compiled for you below.

Receiving monetary gifts

You can receive a sum of money to form all or part of your mortgage deposit. However, to improve your chances of being accepted, mortgage lenders prefer it to be an outright gift from a family member, with no requirement for future repayment – but watch out for inheritance tax!

An individual can give away £3,000 per year tax free, and carry over any of their leftover annual exemption from one tax year to the next, up to the value of £6,000. However, if you are due to be married, you can also give receive an additional; £5,000 if you are the giver’s child, £2,500 if you are their grandchild or great-grandchild, and £1,000 for anything else.

Borrowing money

If your family member or close friend has a few pounds tucked away, there are a number of ways in which they can help you and benefit at the same time!

  • Family Springboard Mortgage: A popular option with families, enabling a relative to provide 10% of the purchase price as security. But, if you keep up your mortgage repayments, they will receive their money back with interest!

  • Joint Mortgage: Your family member or close friend legally own a share of the property and are jointly liable for the mortgage repayments.

Getting a guarantor

To help improve your chance of being accepted for a mortgage, a relative or close friend can either guarantee a proportion of / or your entire mortgage debt. In order to do so, they will need to:

  • Be able to cover any of your missed mortgage repayments
  • Pay their own mortgage
  • Have a number of years left in employment

However, if they are already a homeowner, acting as guarantor for your mortgage could result in you having to pay an additional 3% in Stamp Duty Land Tax!

Buying from family or friends

If you want to buy a property belonging to a relative or close friend, they can sell it to you at a discounted rate from the market value. This is known as a concessionary purchase, and many mortgage lenders will accept this and either base the value of the property on the agreed purchase price, or accept the discount as the buyer’s deposit.

Need help?

As expert mortgage advisors, we can help talk you through all of your available options and ensure that you get the right mortgage deal for your mortgage deposit type. We will also complete all the necessary paperwork for you, and liaise with your lender, estate agent and solicitors to ensure that your application is a complete success!

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