Parents aid first-time buyers

06-Mar-2006

As the average price for property for first time buyers reaches the £200,000 mark, more parents are helping their children fund their purchase, according to research by the Halifax Building Society.

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Figures show that London is the toughest area for young people to get their first foot on the property ladder, with the average home costing in the region of £222,005, reports the Financial Times.

Research by the Council of Mortgage Lenders (CML) reveals that in almost half of all cases, parents are helping their children to take out a first-time buyer mortgage.

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Most parents choose to aid their children by helping to fund the deposit for their first home but figures show that more and more parents are becoming mortgage guarantors.

Now loans for guarantor mortgages are assessed on the basis of the parents' income and not the income of the aspiring homeowner, in order to allow them to afford a larger loan.

Guarantors do not have any interest in the home and their names do not appear on the mortgage deeds but should the borrower default then it is the parents who will be sought to deal with the problem.

"As guarantors you get all of the pain if something goes wrong and none of the gain," Simon Jones, director of Savills Private Finance told the Financial Times.

Many mortgage lenders are now offering 'top slicing' mortgages that assess both the borrower's income together with the guarantor's as opposed to basing it on one salary.

For advice on first time buyer mortgages or to find out how much you can borrow and how much it will cost you, from the UK's leading High Street Brokers, Bradford and Bingley, click here

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