How to help your children onto the property ladder

The average age of a first-time buyer in the UK is 34, which is six years older than it was in 2007. For those of us with working age children in their early 20s and 30s, it is an infuriating and guilt-infused figure.

Many of us in the North of England were able to jump on the property ladder with relative ease in our 20s with no financial help from family. Now, what was a small step for us looks like a mountain to climb for our offspring. It is why more than a quarter of adults aged 20 to 34 still live with their parents and why one in five first homes last year were bought with a cash injection from the bank of mum and dad and/or grandparents.

Here is some advice for those who want to help their children onto the property ladder:

*Try and help your offspring manage their expectations while giving them hope. According to Rightmove, while the average house price in Yorkshire is £197,115 and the average terraced property is £141,841 but in some areas you can still find a good two-bedroom house for around £100,000. The longed-for location may be Harrogate, York or North Leeds but these and other high value hotspots are off-limits for many first-timers. Instead, look to the fringes for better value and check out transport links, though if the ability to work from home continues, this could open up a bigger search area.

*If they haven’t got one, opening a Lifetime ISA, aka LISA, can help if saving for a deposit on a home. Anyone aged 18 to 39 can save up to £4,000 each year until the age of 50. The government adds 25 per cent extra to this up to a maximum of £1,000 per annum.The total can be used as a deposit on a first home or towards a pension. However, if the money is withdrawn for other reasons then there is a 20 per cent penalty charge, which rises to 25 per cent from April this year.

Also note that the property must cost £450,000 or less and you must buy your first home at least 12 months after you open the Lifetime ISA. You must also buy with a mortgage and use a conveyancer or solicitor to act for you as the LISA provider will pay funds directly to them

*If you have the space, they live close by and you all get on well, you could invite your grown-up child to lodge with you for a few months so they can save on rent and save for a deposit instead. You may want to ask for help with bills and food but if your offspring saves £400 to £500 a month for a year they will have at least £5,000 towards a deposit. If this is invested in a LISA, the total will jump to £6,500.

*The Government’s Help to Buy scheme in its old format comes to an end in March this year and is being replaced by a new Help to Buy scheme purely for first-time buyers. They can borrow between five and 20 per cent of the full purchase price of a new-build home up to a maximum value, which for Yorkshire is £228,100. However, remember that the equity loan is only interest free for the first five years so you will begin to pay interest from year six. This is a monthly interest fee of 1.75 per cent of the equity loan, which will rise each year in April in line with the consumer price index plus two per cent.

While new-builds come with an in-built price premium, they are energy efficient and should need little or no maintenance for the first few years but so check out the developer’s ratings as, while most have a good reputation, some do not.

*Family mortgage. You can use your savings to help with a deposit by taking out a family mortgage. Barclays Family Springboard Mortgage is one of the most established. Your child can borrow the full purchase price of a home if you provide 10 per cent of the cost as security for five years. This is effectively a deposit and it must be kept in a Barclays Helpful Start account for the full five-year term, after which it is released back to you with interest, provided your child has kept up with the mortgage payments.

*You can gift a deposit to your child but, as part of anti-money laundering checks, you must make your conveyancer and mortgage lender aware of it. This includes providing a gifted deposit letter, which includes the name of the person receiving the gift; the relationship between you and the total amount and confirmation that you will have no stake in the property, plus photo ID , proof of address and bank statements.

*Don’t forget to make sure your offspring is mortgage ready so they tick all the boxes that will satisfy a lender. This includes being on the electoral roll and having a good credit history.

Would-be first-time buyers should check their own credit history via a report from a credit reference agency such as Experian, TransUnion or Equifax. They should also make sure that they pay all their bills on time and avoid applying for credit in the three months up to applying for a mortgage.