Whether you’re a foreign national or expat with a child living in the UK, or simply wish to help your child onto the property ladder, it can be confusing to know exactly where to start. This is especially true when it comes to property finance, as many are unsure exactly what level of help they can or should give their child.
If your child needs a deposit…
Many purchases (particularly in London) will require a large deposit. A gifted deposit is a sum of money given to your children, which will be used as either the whole or part of the deposit for a property purchase. Most lenders are fine with accepting applicants who will be using a gifted deposit, but this is not always the case, so it’s important to seek proper advice. There’s also a formal process to go through—you can’t simply deposit the money in your child’s accounts. You’ll need to confirm the gift in writing, and confirm proof of funds.
We have experience of arranging this, even on complicated cases—we recently helped two sons secure a buy-to-let mortgage using a gifted deposit from their father, who was a foreign national.
If your child needs a large mortgage…
Particularly if your child is a young adult looking to buy on their own, it can be hard to illustrate to lenders that they can support the mortgage payments—even if they have family wealth in the background and can, in reality, comfortably afford the payments. Of course, you could simply buy a property outright for your children to live in—but this will tie up a lot of liquidity in a single asset, which many high net worth individuals are keen to avoid.
A ‘joint borrower sole proprietor’ mortgage may be a good option. A joint borrower sole proprietor mortgage creates an opportunity to conquer the disparity often created between salaries and property prices, particularly in London. For example, if your child is earning £50,000 a year, they may not be able to borrow more than roughly 4.5 x this amount (£225,000). Even with a large deposit, this would not be enough to purchase property in many parts of London.
A joint borrower sole proprietor mortgage enables you to support your child’s application without being named on the deeds of the property. You will not be a legal owner, but your income and wealth can be taken into consideration when calculating the affordability of the mortgage, meaning more can be borrowed, which may help your child onto the property ladder. Of course, this can also be used the opposite way around; we recently used a son’s salary to support an elderly parent’s application.
If your child is studying in the UK…
Alternatively, if your child is studying in the UK, you may be considering investing in property for them to live in. If you are a foreign national who wishes to buy a residential property solely for your child to live in, some lenders may be concerned about offering you a residential mortgage because it may seem likely you are going to rent the property out, which would therefore require a buy-to-let mortgage. We can also assist with this.
Whichever way you’re looking to support your child, the most important thing is to seek careful advice and consider the full range of options. We have a wealth of experience advising parents looking to help children onto the property ladder and would be happy to advise you further.