How Do I Help My Child Buy Their First Home? A Parent’s Guide

Buying a first home is a major milestone, but in today’s market many young buyers feel that getting onto the property ladder is an uphill struggle. With rising house prices and strict affordability checks, parental support has never been more valuable. As a parent, you might be wondering how you can help your child navigate this important step.

At Coreco, we’ve helped thousands of families explore the best ways to support their children in buying their first home safely, smartly, and in a way that works for everyone. Here’s our guide to the options available and what you should consider.

Understand the Financial Landscape

The average age of a first-time buyer in the UK is rising, largely due to high house prices, student loans, and the challenge of saving for a deposit. For those with little or no deposit, whilst there are now more options available, lenders are more cautious, often requiring stricter affordability checks.

Before stepping in, it’s vital to get a clear picture of what your child can afford, what help they need, and how much you’re realistically able (and willing) to offer.

Ways You Can Help

1. Gifting a Deposit

One of the simplest ways to support your child is by gifting them money for a deposit. A larger deposit can help secure a better mortgage deal with lower interest rates. Many lenders accept gifted deposits, but you’ll need to sign a declaration confirming it’s a gift, not a loan.

Things to consider:

• Will this impact your own financial security or retirement plans?
• Will this impact your own ability to remortgage or take a new mortgage?
• If you have more than one child, how will you handle fairness?
• Consider potential inheritance tax implications if you pass away within seven years of gifting the money.

2. Acting as a Guarantor

If your child’s income falls short of affordability requirements, you could act as a guarantor on their mortgage. This means you’ll be responsible for repayments if they are unable to meet them. While this can improve their borrowing power, it does come with risks to your own financial security, especially if your own home or savings are used as security.

Talk to an adviser before taking on this level of financial responsibility.

3. Joint Borrower, Sole Proprietor Mortgages

These mortgages allow you to be named on the mortgage without being on the property deeds, meaning you won’t be liable for additional stamp duty charges. Your income is considered alongside your child’s, increasing their borrowing potential, but you’ll also share responsibility for repayments.

4. Family Springboard & Lend-a-Hand Mortgages

Several lenders offer innovative mortgage products that allow parents to help without handing over cash directly. These usually involve:

• Placing savings into a linked account as security.
• Holding funds for a set period (typically 3-5 years).
• Receiving interest on savings while your child benefits from a lower deposit requirement.

5. Buying Together

You can buy a property together, either as tenants in common or joint tenants. This gives you shared ownership rights but can complicate things when it comes to selling or passing the property on.

• Joint Tenants – Ownership is split equally, and the property automatically passes to the other owner(s) if one passes away.
• Tenants in Common – Each person owns a set percentage of the property, which can be passed on separately. A legally binding agreement is recommended to protect everyone’s interests.

6. Providing a Private Loan

Rather than gifting money, you could loan it to your child with agreed repayment terms. This can be a useful option but should be formalised through a solicitor to avoid misunderstandings or disputes.

The loan payments will be considered by the lender within their affordability calculations.

7. Helping with Mortgage Repayments

If you’re financially able, you could contribute to monthly repayments, helping your child manage costs, especially in the early years. However, this should be approached with caution to ensure long-term affordability and the mortgage itself will be assessed on your child’s affordability alone.

8. Equity Release (For Older Parents)

If you’re over 55 and own your home, equity release may allow you to unlock some of its value to assist your child. It’s essential to seek financial advice, as this could impact your estate and any inheritance planning.

Please visit our Coreco Lifetime page here for more information on this.

Legal and Tax Considerations

• Stamp Duty: If you already own property, some arrangements may incur higher Stamp Duty charges. A gifted deposit avoids this.
• Inheritance Tax: Gifting a large sum of money may have inheritance tax implications if you pass away within 7 years of the gift.
• Legal Protection: If your child is buying with a partner, consider a deed of trust or cohabitation agreement to protect your gift.

Encourage Financial Independence

While it’s natural to want to help, it’s important not to over-stretch yourself or prevent your child from developing their own financial literacy. Involving them in the mortgage process, budgeting, and planning is crucial.

Speak to an Expert

Every family’s situation is different. The right solution depends on your finances, your child’s circumstances, and your long-term plans. At Coreco, our expert advisers can help you explore all the options and find a path that supports your child, without putting your own financial future at risk.

Thinking about helping your child buy their first home? Contact us today for tailored advice and guidance.