Nationwide Building Society has launched a Family Deposit Mortgage, aimed at parents looking to help their kids get onto – or even further up – the property ladder.
It works like this – the parent remortgages on their existing property with Nationwide, borrowing a bit extra in the process.
They can then pass that cash directly onto their loved one, who can then use it towards their own deposit for a mortgage with Nationwide.
Henry Jordan, head of mortgages at Nationwide, said there was a clear demand for a “flexible and accessible” way of using the money tied up in people’s homes.
“We know that trying to raise a deposit can be the most significant barrier to becoming a homeowner,” he said.
The importance of the Bank of Mum and Dad
Mum and Dad are not just great for making tea – they are also behind the fastest rising ‘bank’ in the UK.
The Bank of Mum and Dad helped fund the purchase of property worth £77billion during 2016, with loans of around £5.6billion across the year, according to Legal & General .
And the main way that parents help their kids is by beefing up their deposit.
While this usually comes in the form of a gift (around 57% of buyers that get help from loved ones get the cash this way), some parents offer the money as an interest-free loan, while 5% expect the money back with interest.
I need a bigger deposit!
It’s understandable that buyers need help getting a deposit together – as house prices rise, the deposit needed even for the most expensive mortgages have become much more significant.
According to a study by Halifax last year, the average deposit now needed by first-time buyers is a monster £32,927.
But every penny counts when it comes to your deposit, particularly when it’s your first mortgage.