Seeing your child or grandchild buy their own home can be very satisfying – but with high property prices, it can be difficult for young buyers to afford to take that first step.
We can suggest a number of options that allow you to help younger relatives without necessarily handing over large amounts of cash. Using our wide-ranging experience, Franklyn will help you find the most appropriate from a range of flexible ways you can lend a helping hand to younger family members.
The most obvious option is to gift an amount of money, usually towards the deposit for a home. If the younger relative cannot afford to purchase a property with their income alone, you may join in on the mortgage but NOT the property ownership deeds. Meanwhile, the younger person can purchase a property that was previously out of reach for them and does not lose any Stamp Duty allowance for first time buyers. Your estate for inheritance tax (IHT) will also be reduced by the value of the mortgage.
Another option is to put a sum into a an account that sits alongside the mortgage, giving your relative the benefit of an interest rate applicable to a lower Loan to Value mortgage.
If you have sufficient equity in your own property, a lender may permit you to place a charge on it for a certain amount or percentage of your younger relative’s mortgage. This may be in lieu of a deposit or can have the same effect as placing funds in a Family Security Account. Your estate for IHT purposes is reduced by the value of the charge on your property whilst it is in place.
Finally, you could look at a Family Offset Account. This allows family members to deposit funds into an account linked to mortgage, with your younger relative paying interest only on the net amount outstanding, which may reduce the interest rate and the mortgage payments. You also have access to your funds at any time. Choosing the right option from so many can be difficult. So to find out more about which might be best for you, just contact any member of our mortgage team.
The home on which the mortgage is secured may be repossessed if the mortgage borrower(s) does not keep up repayments on the mortgage.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.