Can i guarantee my sons mortgage

More and more borrowers are relying on the bank of mum and dad when it comes to getting on the property ladder, and there are a number of ways to help children who want to get a mortgage. If you're looking for a way to help your children buy a home, a gifted deposit can be the simplest way. A number of caveats come with gifted deposits. A mortgage lender will want proof that the money is a gift, which will usually mean signing a declaration saying that the person gifting the money doesn't want it back and doesn't expect to have any equity or legal interest in the property.

If the person gifting the deposit dies within seven years of making the gift, inheritance tax may have to be paid. An alternative to gifting money is lending it. While borrowing money for a mortgage deposit from family may seem better than taking out a loan as borrowers may not need to pay interest, it's still considered a loan for the purpose of the mortgage application. Since the Mortgage Market Review MMR in , lenders may not allow you to take out a mortgage if you have a loan to repay.

If lenders do allow borrowers to take out a loan, they're likely to add repayments to your monthly outgoings. This may impact a borrower's affordability assessment, so could reduce the size of mortgage a lender is willing to consider offering. However, if saving a large enough deposit is the main obstacle to your child's homeowner ambitions, rather than their affordability, this could be a solution.

If giving or lending money to children isn't an option, another way parents can help is by being named as a guarantor on their child's mortgage. A charge is placed against the guarantor's house, which means that if the borrower defaults on mortgage payments the guarantor's home could be at risk. Another option for parents is to buy into a property with their children and take out a joint mortgage. With higher property prices and restricted rates of lending, obtaining a first home can be an arduous task.

When it comes to securing a mortgage for your child, you have a number of options available to you. The first and probably most obvious option to help your kids purchase their first home is to loan them the money. A loan agreement with your child can be as simple as a conversation over the dining table, however, depending on the reliability of your children, it may serve better to have the agreement formalized in some way.

In doing so you are able to set an interest rate this figure is up to you and clearly stipulate the terms of your loan and agreement.

Moreover, depending upon the size of the loan, it is likely that your child would have to pay mortgage lenders insurance, as part or all of the downpayment has been borrowed.

Furthermore, although this may be the most accessible option to help your children, it is also creating another debt load, which may work against them if they need to apply for a mortgage for the remainder of the property value. If you have the liquidity available to finance the entire purchase, however, giving your children a loan to help guarantee a mortgage for them could become a viable option- provided you trust them enough to pay you back!

This is probably the easiest and cleanest way you can finance a property purchase for your children. Although it may not be an option to gift the entire amount, for most situations gifting the money often makes the most sense from a:. Tax perspective There are no tax consequences for gifting the money. In addition, gifting the money to your children can help to avoid probate fees, if you planned to hand it over upon your passing anyway.

Legal perspective Once gifted, that money is no longer your property, nor can you be held liable for anything it is used for. It will save you a lot of potential stress and confusion if you are clear from the start about what you want to do to help your child and the terms of your financial help. You should decide whether you are giving your help as a gift, an investment or a loan and if you will charge interest , and make this clear to your child beforehand to avoid any confusion further down the line.

If you are named on the property's deeds you may have to pay tax related to the property, such as stamp duty or capital gains tax on any profit made from a sale. If you are gifting money this may also be subject to inheritance tax if you die within seven years.

You hope that no dispute will ever reach a point of having to get lawyers involved, but drafting up some formal agreements with a solicitor beforehand can be a good idea, especially if you're treating your help with the house as a loan or investment.

On another legal note, if you want to make sure that the house cannot be sold without your permission, you can contact the Land Registry to ensure that the property is registered with a Restriction on Title. Whether you have bought the entire house outright, helped with a deposit or acted as a mortgage guarantor, you should remember this is not your home and you shouldn't really make any rules about how your children are going to live there.

You would be well within your rights to ask them to respect your wishes regarding the property, but obviously using financial help as emotional leverage is likely to lead tensions within any relationship. Residential mortgages. We use cookies and similar technologies.

You can use the settings below to accept all cookies which we recommend to give you the best experience or to enable specific categories of cookies as explained below. Find out more by reading our Cookie Policy. Guarantor and Family Help Mortgages. Share this guide. Help your kids on the property ladder - guarantor mortgages and more. What is a guarantor mortgage? Who are guarantor mortgages suitable for?

Who can be a guarantor? How much does a guarantor need to earn? Who offers guarantor mortgages? Guarantor mortgages FAQ Is a guarantor on the mortgage forever? Is a guarantor mortgage the same as a family boost mortgage? What are the interest rates on guarantor mortgages? How can I find out who does guarantor mortgages? Other family-assisted mortgage options If parents, grandparents or the whole family are unable to help by buying a house outright which is the most direct way to help, but isn't really on the table for most families , there are a number of ways families can help first time buyers.