7 Ways to Help Your Children Buy a Home

For many parents and grandparents, finding ways to help their children buy a home has become one of the biggest financial decisions they will ever make.

With house prices remaining high, deposits difficult to save, and lending criteria still strict, more families are asking how they can provide support without jeopardising their own financial security.

The good news is there are several potential ways you may be able to help:

1. Give a Lump Sum (Cash Gift)

A lump-sum gift could mean a bigger deposit, making it easier not just to get a mortgage, but to get one at a better rate.

It’s crucial not to risk your own financial security or retirement plans by giving away more than you can afford, and you need to be aware of the inheritance tax implications. This type of gift is known as a Potentially Exempt Transfer (PET), and if you die within seven years of giving it, it might be counted as part of your estate for inheritance tax.

Mortgage lenders usually require written confirmation that funds are a gift with no need to repay them.

2. Give an Interest-Free Loan

Instead of gifting the money outright, you could provide an interest-free loan. This could reduce the financial impact on you.

You should draw up a formal agreement that outlines the repayment terms and confirms that the loan is interest-free. Mortgage lenders may be willing to accept this type of arrangement, provided the loan doesn’t need to be repaid immediately to avoid affordability issues.

If you can afford it, you might be able to wait a year or so while your child or grandchild finds their financial feet before they start repaying your generosity.

3. Pay into a Lifetime ISA

If your child or grandchild is aged between 18 and 39, encouraging them to open a Lifetime ISA (LISA) could be an effective longer-term strategy. You may even wish to contribute towards it on their behalf.

A LISA allows you to save up to £4,000 each year, with the Government adding a 25% bonus (up to £1,000 annually). There’s also the potential for investment growth and compounding, which can help build a property deposit

The Government plans to replace the LISA with an alternative savings product for first-time buyers in 2028, but anyone who already has a LISA will be able to continue saving into it.

Withdrawals are only penalty-free when used for a first home purchase, from age 60, or in cases of terminal illness. Otherwise, a 25% Government charge applies, which can reduce the amount received to less than the total contributions made.

You can transfer a Lifetime ISA to another provider without incurring a withdrawal charge.

There’s no cap on the transfer amount, but any contributions made in the current tax year must be transferred in full to the new provider.

A Lifetime ISA transfer:

• Must be completed within 30 calendar days of receiving the investor’s request
• May include any outstanding government bonus, which the new provider can claim
• Must include all relevant account information for the receiving provider

4. Consider a Guarantor Mortgage

With a guarantor mortgage, another person agrees to take responsibility for the mortgage repayments if the borrower cannot pay.

This guarantor, typically a family member or close friend, must be prepared to cover repayments if the borrower defaults. In many cases, a guarantor mortgage could help your child secure a mortgage with a smaller deposit or access more favourable rates.

However, it’s important to understand the risks involved and how this commitment could affect your own financial position.

5. Take Out a Joint Mortgage

With a joint mortgage, you agree to buy a home with your child, meaning your income and assets are included when the lender assesses affordability.

You will be liable for paying the mortgage if they cannot.

The drawback is that a joint mortgage could mean missing out on first-time buyer Stamp Duty relief and may also trigger higher Stamp Duty rates if one buyer already owns another property.

6. Consider a Joint Borrower Sole Proprietor Mortgage

Joint Borrower Sole Proprietor (JBSP) mortgages can avoid this problem by keeping ownership separate from support.

They allow up to four people to be named on the mortgage, but your name does not appear on the deeds, helping avoid the stamp duty issue.

However, all borrowers remain liable if repayments are not made, so this type of mortgage still carries risk.

The child owns the property as the sole proprietor, but because they’re borrowing alongside you, lenders may be prepared to lend more than they would have if based solely on your child’s income.

7. Speak to Continuum for Professional Financial Advice

There is no one-size-fits-all solution when looking for ways to help children buy a home or support grandchildren onto the property ladder. The most appropriate approach will depend on your financial circumstances, retirement plans, tax position and the level of support you feel comfortable providing.

Before making any decisions, it’s worth taking the time to understand the advantages, risks and tax implications of each option. Families looking to help children buy a home should consider not only the immediate benefits, but also the potential impact on their wider financial plans and future goals.

At Continuum, we can help you explore the options available, understand the potential implications for your own financial future, and identify the solution that is most suitable to meet your family’s needs.

2 years left to open a Lifetime ISA – should you use one for retirement? – Which?

Transfer Lifetime ISAs between managers – GOV.UK

This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your Mortgage, Savings, Investments, or retirement planning.

The value of an investment can go down as well as up. When investing Capital is at risk. The Financial Conduct Authority does not regulate taxation and trust advice or will writing and some aspects of unsecured loans.

Your home may be repossessed if you do not keep up repayments on your mortgage.

By incurring a Lifetime ISA Government withdrawal charge you may get back less than you paid in. By saving in a Lifetime ISA instead of qualifying pension scheme you could lose contributions by your employer, if any. Saving in a Lifetime ISA may affect your entitlement to current and future means tested benefits.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. We recommend that the investor seeks professional advice on personal taxation matters.