How can I help my children get on the ladder?

Q. I have two sons, aged 26 and 29, who both live in London. I am in a position to help them to get on to the property ladder — what is the most efficient way to achieve this? Given the property prices in London, they need as much help as possible.David, Warminster
Getting on to the property ladder can be daunting amid high house prices, especially in London, and parental assistance can turn the dream of homeownership into a reality. For parents who have the money there are several ways you can help.
One of the simplest ways is to give your child money for their deposit. This can significantly reduce the amount they have to borrow and make it easier to get a mortgage. Lenders usually require a letter confirming that the money is a gift and not a loan. Parents who are older should take professional advice, however, because giving away money may have inheritance tax consequences.
Joint borrower sole proprietor mortgages allow the child to buy a property in their own name and add the parent’s name to the mortgage, but not all lenders offer them. Both incomes are taken into account when the lender decides how much can be borrowed, so it can boost the loan size and mean your child can afford a more expensive property. Both parties will be equally responsible for repayments, so it’s essential to understand the risks involved.
A parent should consider taking independent legal advice to confirm that they understand their liability for the mortgage — they will not have an interest in the actual property, but will be on the hook if their child cannot make their repayments. Without being on the title deeds, it is possible to avoid the additional 3 per cent second-home stamp duty surcharge that would be payable if the parent was on the deeds and already owned their own property.
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The Barclays Family Springboard mortgage allows family members to help a loved one get on or up the property ladder. It has two elements: the borrower and the helper. Parents, or whoever is helping the buyer, provide a 10 per cent security deposit, which is held in an account called Helpful Start.
The buyer can then buy a property with as little as no personal deposit. After five years, the 10 per cent contribution will be released back to the parent, with interest added (restrictions may apply), and the property owner continues with their mortgage as normal.
Halifax’s Family Boost mortgage allows a family member to put 10 per cent of the agreed property purchase price into a savings account, which is then locked away for three years to earn interest. It enables the first-time buyer to get a mortgage at 95 per cent to 100 per cent loan-to-value (LTV). The buyer or family member has to hold a Halifax Reward current account to apply.
The shared ownership scheme allows eligible buyers to get a mortgage for a share of a property (usually between 25 per cent and 75 per cent) and to pay rent on the remaining value at a discounted rate. Rent is paid to the housing association or private developer who owns the building.
The deposit can be as little as 5 per cent of the price of the share that you buy, rather than of the whole property. Over time, buyers can increase their share until they own the property outright. The properties are usually sold on a leasehold basis, so there will probably be a monthly service charge. To qualify in the London area, the annual household income has to be less than £90,000.
The Lifetime Isa is a tax-free savings account that could help your sons to buy their first home, or to save for later in life. Savers aged between 18 and 40 can put away up to £4,000 each year until they are 50. The big plus is that the government adds a 25 per cent bonus, up to a maximum of £1,000 a year. Properties bought with the savings must cost no more than £450,000, which can be tricky in London. If you withdraw the money before the age of 60 for anything other than to buy a first home, you pay a 25 per cent penalty that effectively forfeits the bonus, and a little more on top.
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If an affordable homeownership scheme is not for your sons, or they don’t qualify, there is a choice of mortgages on the market tailored to first-time buyers.
Nationwide’s Helping Hand mortgage allows first-time buyers to borrow up to 95 per cent LTV when taking out a five or ten-year fixed rate. Eligible first-time buyers can borrow up to 20 per cent more with this mortgage than a standard mortgage with Nationwide.
If you are renting with a good track history and looking to buy your first home, or you have not owned a property in the past three years, then Skipton Building Society offers a Track Record mortgage requiring a deposit of 5 per cent or less. The maximum mortgage amount available is £600,000, and the rate is fixed for five years.
First-time buyers can borrow up to 22 per cent more than they usually can with Halifax’s First-Time Buyer Boost mortgage. They need at least a 10 per cent deposit and the total household income of everyone applying must be a minimum of £50,000. All applicants have to be employed, not self-employed.
Accord’s £5,000 deposit mortgage is available only to first-time buyers and offers a 99 per cent LTV with a £5,000 minimum deposit. You have to borrow between £95,001 to £495,000 and you cannot buy a flat or a new-build.
Adrian Anderson is the founder and managing director of Anderson Harris and has been a mortgage broker for more than 20 years