How to Help Your Child Get on the Property Ladder
Supporting the next generation without compromising your own
With rising property prices and high deposit requirements, many younger buyers are struggling to get a foot on the property ladder. In response, parents and grandparents are increasingly stepping in to offer financial support. While helping a loved one purchase their first home can be incredibly rewarding, it is important to understand the options available, and the risks involved.
This article explores three popular ways to assist: gifted deposits, guarantor mortgages, and joint borrower sole proprietor (JBSP) arrangements. Each has benefits, but also financial implications that need careful consideration.
Gifted Deposits
One of the simplest and most common ways to help is by gifting part or all of the deposit. This approach reduces the amount your child needs to borrow and can open the door to more favourable mortgage terms.
What to consider:
Lenders require written confirmation that the money is a gift, not a loan.
You will usually need to declare that you have no intention of seeking repayment.
Gifting large sums may have inheritance tax implications if you pass away within seven years of the gift.
Gifted deposits can be an effective way to reduce monthly repayments and improve mortgage affordability, but it is important to ensure that the gift fits within your own long-term financial plans.
Guarantor Mortgages
Guarantor mortgages allow a parent or grandparent to agree to cover repayments if the borrower falls behind. This can help a first-time buyer qualify for a mortgage they would not otherwise be eligible for, often because of income or affordability constraints.
What to consider:
You are legally responsible for the mortgage if your child cannot pay.
Your own assets, including your property or savings, may be used as security.
Missed payments by your child could affect your credit rating and financial stability.
While guarantor mortgages can provide a pathway to homeownership, they carry significant risk. They should only be considered if you are confident in your child’s ability to manage the mortgage independently.
Joint Borrower Sole Proprietor Mortgages
A JBSP mortgage allows a parent to be named on the mortgage but not on the property’s title deeds. This can help a child borrow more without triggering an additional property ownership or second home tax liability for the parent.
What to consider:
Your income is factored into the affordability assessment, which can increase the borrowing limit.
You will not own any part of the property but will be jointly responsible for the repayments.
This structure can have tax implications, particularly if you are helping more than one child.
JBSP arrangements are increasingly popular, offering flexibility without affecting ownership rights. However, as with all joint financial commitments, it is vital to seek professional advice before proceeding.
Getting the Right Advice
Helping your child onto the property ladder is a generous and often life-changing gesture. But to do it wisely, you need to strike a balance between support and security. The right mortgage structure can reduce risk, preserve your own financial future, and provide your child with a strong foundation.
At Altura Mortgage Finance, we specialise in guiding families through these decisions. Whether you are gifting a deposit, acting as a guarantor, or exploring JBSP options, we are here to provide tailored advice that protects both you and your loved ones.
