Is Now the Time to Help Your Children or Grandchildren Buy Their First Home?

The Rise of 95% Mortgages and What It Means for First-Time Buyers

The availability of 95% mortgages has reached its highest level in five years, offering first-time buyers more opportunities to get onto the property ladder with a smaller deposit. While this is encouraging for many young buyers, high loan-to-value (LTV) mortgages come with certain risks, including higher interest rates and stricter affordability checks. For parents and grandparents looking to support their loved ones in purchasing their first home, understanding these factors is essential.

How You Can Help Your Children or Grandchildren Buy a Home

With rising property prices making it harder for first-time buyers to save for a deposit, financial assistance from family members has become increasingly common. There are two main ways to provide this support:

1. Gifted Deposits

A gifted deposit is a financial contribution towards a first-time buyer’s deposit, given without the expectation of repayment. This option can significantly increase mortgage affordability and open the door to better interest rates. However, lenders require clear documentation to confirm that the money is a gift rather than a loan, as any expectation of repayment could affect the mortgage application.

2. Becoming a Guarantor

Some lenders offer guarantor mortgages, which allow a parent or grandparent to use their income or property as security for the loan. This can help young buyers secure a mortgage they might not otherwise qualify for. While this approach reduces the immediate financial burden on the buyer, it does come with risks, as the guarantor is responsible for repayments if the borrower cannot meet them.

The Importance of Seeking Professional Advice

Supporting a loved one in buying their first home is a generous and impactful decision, but it is crucial to understand the financial and legal implications. Speaking with a mortgage broker can help you explore the best options while ensuring that any financial assistance is structured in a way that benefits both parties.

If you are considering helping your child or grandchild with their first home purchase, get in touch with Altura Mortgage Finance today. Our expert team can provide tailored advice to help you make an informed decision that works for your family’s financial future.