The Bank of Mum and Dad: How family can help with your home purchase
Buying your first home has become increasingly challenging for many people. Rising living costs, reduced Stamp Duty reliefs, and high rent means family support is more common than ever. This is often referred to as the Bank of Mum and Dad.
Ways parents can help
There are two main ways family support is usually provided.
A financial gift - A gift can boost your deposit and unlock better mortgage rates. Lenders usually require written confirmation that the money is a genuine gift, that the person giving the gift will not own any part of the property and they don't expect repayment.
A family loan - Alternatively, parents can lend money under a loan agreement setting out repayment terms and interest. Your lender must be told about any private loan and this may affect mortgage affordability calculations.
Benefits and drawbacks
A bigger deposit will usually give you access to better financing options. For parents, there may also be potential inheritance tax benefits.
However, family loans can reduce borrowing capacity once affordability is reassessed by the lender. Clarity from the outset is essential to avoid misunderstandings.
What this means for you
Deciding whether support is a gift or a loan should happen early. The arrangement should be clearly documented so that everyone understands the position before contracts are exchanged.
Next steps
If family support forms part of your purchase, taking legal advice early helps ensure the arrangement is structured properly and does not delay your mortgage or transaction. Our team can guide you through the options and documentation needed.
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