Believe it or not, you could purchase a house in the UK for as little as £850 around the time of the Second World War.
House prices have continued to grow at a disproportionate rate to earnings in the UK, however, making it increasingly difficult for people to get their foot on the property ladder. In fact, the average house price to earnings ratio reached 7.77 in 2016 and this is expected to increase further in the near-term.
With this in mind, there’s a growing pressure on parents to help their children successfully purchase their first home. Here’s how you can achieve this objective.
Get the Right Financial Advice
Before you get started, you should make sure that you have the right financial advice. This will enable you to create an actionable financial plan, and one that is relevant to your earnings and existing financial circumstances.
Service providers such as Tilney can help in this respect as they can provide comprehensive financial advice and help you create a plan to assist to your children in the future.
Firms of this type also offer estate planning advice in instances where you intend to leave your current property to your children.
This will help you to potentially minimise your Inheritance Tax bill and optimise the value of your estate, with the ‘seven-year rule’ making it possible to gift real estate to beneficiaries before it’s subjected to levies.
Help your children to save a deposit
The failure to save adequately is rife throughout the UK, thanks largely to the significant imbalance between inflation and earnings.
So even with consecutive base rate hikes being issued by the Bank of England, customers have not yet seen this applied to their individual accounts.
With this in mind, one of the best ways that you can help your children is by contributing towards their house deposit.
This will not only provide invaluable assistance to your kids, but it will also reduce the value of the mortgage required and the amount repayable in the future.
Consider secured loans or guarantor mortgages
If you do not have the cash resources to provide a deposit, there are other ways in which you can help.
You could take out a secured loan against your own property, for example, or leverage equity release to access some much needed cash.
This can then be given to your child as a gift, although you should always act responsibly and avoid taking on debt that you cannot afford to repay.
If you don’t want to borrow money directly, you could instead lend your children capital through a guarantor mortgage. In this instance, you’ll assume responsibility for the mortgage repayments if your children are unable to do so, providing the security and peace of mind that lenders demand.