If you’re thinking about your child’s future, there’s no doubt that their finances have popped into your head from time to time. We all need money to survive, and it’s more difficult than ever for first-time buyers to get on the property ladder. Aside from a car and a wedding, a house is often a person’s first big buy and without help or savings, it can seem like an impossible dream for many. So, if you’re planning on helping your child buy their first home, here are some of the many ways you can do it.
As your children grow up, they may receive many cash gifts that you don’t have much use for. If your child receives cash from friends and family as birthday gifts or Christmas gifts, open a savings account and make sure to deposit the cash. Over the years, this can add up to a significant amount which could pay for your child’s deposit on a house. It’s one of the best ways to help your child get onto the property ladder because they will be using their own money, they won’t have missed the money and they won’t have to deal with the guilt of asking for your help.
Get Family and Friends Involved
Many parents are starting to clock onto the fact that being an adult is more expensive than it ever has been. For example, your parents could have easily bought a house for £27,000, you may have bought your first home for £92,000, can you imagine what your child’s first home may be worth? Therefore, it’s become more popular for parents to set up a fund for their children from birth. That way, family and friends can make cash donations when babies arrive, for christenings, baptisms, birthdays and many more. If they know that there’s a dedicated fund for a child, they’re less likely to spend money on gifts that may not be used.
If you’ve left it a little late to save your child’s money, it doesn’t mean it’s too late to help. If your child is at the point where he/she needs a first-time home, why not consider investing? For example, if your child has to have 10% of the purchasing price for the deposit you could invest that 10% yourself. This way, your child doesn’t have to come up with the 10% all alone and you know your money is safe. If you look for a property that has the potential to make more money in the future, you could get your 10% plus interest back when your child sells the house on. It’s another way of making sure everyone’s a winner.
A first-time buyer will usually find it difficult to get a loan as well as a mortgage. That’s often because first-time buyers are young and haven’t had the time to build up good enough credit to be accepted. Another way you could help your child is to take out a housing loan, on the agreement that your child will make the payments to you. Parents often have a much better chance at being accepted for a loan. The loan could help to pay for the deposit and any solicitors fees. However, it’s important that you trust your child to repay you before putting yourself in this position. If you’re unsure but still want to go ahead, put the agreement in writing and have your child sign it.
Sell an Heirloom
Family heirlooms are often kept and passed down through generations because they have value that’s likely to increase over the years. If you have a family heirloom that you’re going to pass down to your children, it could be time to change the tradition. Selling a family heirloom could provide your child with the money needed to pay for some or all of their first home. You won’t be losing anything by selling it and using the money for a house because the money transfers from one asset to another. As long as your child maintains the house and stays financially stable, the value of the heirloom will still be protected.
If parents are in a financial position to give a deposit amount as a gift, it could help your child significantly. For example, some families find that they lose a loved one before their child reaches an age where they’re able to purchase a property. This may mean that, as parents, you’ve been left a significant amount of money because of someone’s will. Giving a cash gift to a child will mean they don’t have to worry about raising the money themselves which is one less stress when moving home.
A springboard mortgage is another option for families wanting to help out children. It’s usually available for first-time buyers who are having difficulty coming up with a deposit. As a parent, you would open a bank account with 10% of the property’s value deposited into it. Your child would get a mortgage from the same bank and pay interest for three years. At the end of the three-year period, you get the 10% back plus interest. The only downside is, if your child was to miss any payments for whatever reason, your money would be held in the account for longer.
Rent to Buy
Ever thought about being your child’s landlord? If you’re in a position to buy a house for your child, they could eventually own it by renting it from you. Your child could either make the payments you’re meant to make for the mortgage, or pay you more than the mortgages worth every month so there’s eventually a deposit amount there when they want to get their mortgage.
Helping your child with money can often lead to family arguments, but if you’re sensible with your finances and you’ve taught your child the same, it can be a wonderful way to give your child a helping hand to achieve a dream. Seek some advice from a financial advisor before making any decisions.