Let’s face it, for many young people getting on the property ladder these days feels a bit like trying to win the lottery while juggling flaming pineapples. Without the “Bank of Mum and Dad” (BoMaD), it can feel near impossible and certainly too unlikely to be motivational when it comes to savings. In fact, BoMaD are now unofficially one of the UK’s biggest mortgage lenders. In 2024 alone, BoMaD handed out a HUGE £9.6 billion1 in gifts and loans, helping 173,500 first-time buyers. To put that into perspective, that’s more than half of all new homeowners last year. And the average parental contribution? A staggering £55,572 per buyer!
With the average house price in England2 at £291,000 (and in London it’s £523,000), and the average salary sitting around £32,500, it’s no wonder young buyers are turning to their parents for help. That’s nearly 9x income, which makes BoMaD less of a luxury and more of a necessity.
So, if you’re a parent wondering how to help your kids buy their first home without selling your own home, here are some smart (and surprisingly doable) ways to help. Not all of them involve giving away a large chunk of capital!
1. Help with the deposit: The classic BoMaD move!
Gifting the cash
If you’ve got some spare funds and a generous streak, gifting part (or all) of the deposit is a great way to help. Just be clear:
- It’s a gift, not a loan.
- You’re not claiming ownership of the property.
The added benefit is that if you live for seven years after giving the gift, it’s excluded from your estate for inheritance tax purposes.
Lending the money instead
Not quite ready to part with the cash forever? You could loan it to your child:
- You charge interest equivalent to your savings account, so you don’t miss out on any interest. This does reduce your access to the capital, so make sure you have sufficient other funds in case immediate access is needed.
- Be aware: once you start charging interest, the arrangement may be classed as a loan, which could be treated differently from a gift. Always check with your financial adviser to see if this could affect your options.
The good news? Your child ends up paying less interest than they would to a bank.
Just remember: they’ll still need a mortgage for the rest, and you might owe tax on the interest you earn.
Family-assisted Mortgages
Some lenders offer clever options where you deposit a lump sum with them for a few years as security. If your child keeps up repayments, you get your money back at the end.
Using your own home’s equity
If your house has increased in value, you could tap into that equity to help out. Make sure you get independent advice. This can be complicated and isn’t something to do without financial advice.
2. Boosting affordability: Your income can be used to help!
Mortgage lenders prefer borrowers with a strong income multiple. Let’s be honest – your finances probably look far more attractive to them than your child’s do right now.
One way to help is by exploring options like a Joint Borrower, Sole Proprietor (JBSP) mortgage. This allows your income to be considered for the mortgage application, giving your child a better chance of being approved and borrowing enough, while only their name goes on the property deeds.
However, if your name is added to the deeds, the property could be classed as a second home for you. That means you could face higher stamp duty and potentially capital gains tax later on. Read our article: Get your children onto the property ladder without 2nd property taxes >
3. Credit rating: Sharing your good name
Sometimes it’s not that your child has bad credit, it’s that they don’t have much credit history at all. By joining the mortgage, your stronger credit record gets taken into account. This can give lenders more confidence and significantly boost your child’s chances of being approved.
4. Exploring all the options
Lenders are getting creative. From buy-to-let/guarantor hybrids for uni students to deposit booster schemes, there’s a growing number of BoMaD-friendly products in the mortgage market.
They are more complex than your average mortgage, but with the right advice, helping your child buy a home doesn’t have to be a financial minefield.
Helping your kids onto the property ladder is one of the most meaningful gifts you can give, and it doesn’t have to mean giving away your savings or giving yourself a worse retirement. Whether you’re gifting, lending, or co-signing, make sure you:
- Understand the tax and legal implications
- Protect your own financial future
- Get expert advice tailored to your situation
With a bit of planning, BoMaD can be a positive move for all. Please get in touch with one of our advisers if you have any questions or would like any further mortgage advice.
Would you consider helping your children onto the property ladder – either with savings, a loan, or by joining their mortgage? Let us know by adding a comment below.
References:
1Bank of Mum and Dad has handed out £38.5bn to home buyer children… in just four years | This is Money
2Private rent and house prices, UK – Office for National Statistics
Editor’s note: This post was originally published in September 2022 and has been completely revamped and updated for accuracy and comprehensiveness.