Bank of mum and dad mortgages

Jaco70

I’ve been thinking about how to help our kids to buy properties when the time comes. Hopefully a few years yet, but planning ahead. I googled how much the average help given by BOMAD is, and although the figures differed quite dramatically depending on who was providing the data, I was shocked at how big the numbers were.

One website said the average gift is 54k !!! , and the Daily Mail said 32k.

Although the ‘average’ is somewhat irrelevant, as we can only afford what we can afford, I was surprised at how generous parents are.

Ten grand seems like a fairly big gift, although I realise that this wouldn’t be enough for a deposit these days.

Be interesting to hear other people’s experiences.

RogerPensionGuy

I have no idea what the average figure is but, this whole system of older family members helping to prop up the housing market prices and just dragging more and more money and debts in to this pastime.

With the above in mind, how about the people that don't have BOMAD funds avail.

Government Help To Buy is worth a mention in this thread.

We just seam crazy about getting people in to big old long long debts. 

A couple of links below for interest.
...
...https://www.legalandgeneral.com/retirement/rewirement/funding-retirement/bank-of-mum-and-dad/
....https://inews.co.uk/news/help-to-buy-worst-decisions-ever-flat-owner-trapped-interest-2400601

Petriix

Ultimately it's a question of how much is actually required to buy a house. The numbers are eye-watering:

Typical house at £300k, £30k deposit, 6% interest on £270k mortgage over 30 years = £1619 per month. To pass affordability on that you'd need an income of at least £54k and maybe as high as £67.5k.

The only way I was able to buy was with a six figure 'loan' which ultimately became a gift when the BOMAD received a large inheritance themselves.

£10k wouldn't even make a dent these days. 

justwhat

Petriix said:

Ultimately it's a question of how much is actually required to buy a house. The numbers are eye-watering:

Typical house at £300k, £30k deposit, 6% interest on £270k mortgage over 30 years = £1619 per month. To pass affordability on that you'd need an income of at least £54k and maybe as high as £67.5k.

The only way I was able to buy was with a six figure 'loan' which ultimately became a gift when the BOMAD received a large inheritance themselves.

£10k wouldn't even make a dent these days. 

Trouble is 300k is not the bottom of the housing market.  You have to start at the bottom and work up. 
You buy the cheapest house you can find just to get a foot on the ladder. Your first house Is not going to be exactly what you want or the area.  

People seem to  not want to start at the the bottom or move jobs/areas based on affordability.

btw 54k for a joint couple is  do-able for many.

Growingold

We all want to help our children as best we can and there is nothing wrong with that but are we really helping them by stumping up large sums of cash to help them out.

Okay when we bought our own houses prices were considerably less but also were our wages.  A lot of people today receive eye staggering wages and yet they still say they can't afford to pay their mortgage.  Out of these people only a few really can't the others just make wrong choices with their disposable income.  I know when I was saving for the deposit for my first house every penny I could I saved hard.  I went without because in those times that is what people did to realise their dream of property ownership.  I had no BOMAD to help fund my deposit.

By bailing our children out are we really helping them with lifes choices.  In time if we continue to help them financially they will come to expect it whenever things get tough.

I would say never feel guilt tripped into giving your children money and when you do only give what you can comfortably afford.  There is no right or wrong amount.  Don't get into debt just to help them because you feel bound to do so and it seems to be what every parent is doing now and you don't want to feel as if you're letting them down.

  

RogerPensionGuy

I have a few friends at 60+ and not great income streams and have and are going down the road of equity release. 

If these friends ever wish to move/sell their properties to better suit their own needs and buying another property could be an eye watering time for them.

Biggest problem here in the UK is successive governments for many decades have failed to ensure enough sensible building was achieved, they just talk about and never achieve. 

By failing to build sufficiently has helped make housing very expensive and then cheap easy loans and mortgages at every opportunity to feed the price frenzy. 

We are just starting on one of the down slopes now and it will be painful for a segment of people unfortunately. 

People talk about negative equity, I was never worried by the phrase,  if a person has the financial fundamentals I see little problem with it, back in the day they were selling new houses with a 105% mortgage and house price often reduced after that new purchase, so straight away a debt of 105% and value of 90%

Not forgetting the mortgages where people were given a payment holiday or similar for the first few years and obviously the mortgage got bigger.

We have just got so used of debts and many of us max out on debts especially on big items like housing. 

It's crazy.

silvercar

We helped our eldest to buy. We live near London, he has been renting in London since finishing uni 10 years ago. He would first rent with groups of friends, his most recent 2 rentals have been the spare room of friends that have bought. 

He wouldn’t be able to buy on his own and doesn’t have a partner. He also works in the public sector, so affordability is harder. We helped with a large deposit and my OH went on the mortgage (1 owner, 2 borrowers mortgage). He bought a 2 bedroom flat, rents out the second bedroom to help pay the mortgage. 

His younger sibling is married and they have saved hard. They will hopefully buy in the next couple of years. They will move further out in order to buy a house. To be fair we will help with a similar deposit, which will mean they can get a decent house. 

We are a few years from retirement and we have parents on both sides, so we may get inheritances on both sides in the fullness of time.

Sea_Shell

At least with buying they (hopefully) end up with an asset.

Some BOMADs are gifting substantial sums to pay RENT!! 

MWT

justwhat said:

Trouble is 300k is not the bottom of the housing market.  You have to start at the bottom and work up. 
You buy the cheapest house you can find just to get a foot on the ladder. Your first house Is not going to be exactly what you want or the area.  

People seem to  not want to start at the the bottom or move jobs/areas based on affordability.

True, when I started down the path of home ownership in 1982, my first two properties were distant from my work and in areas I knew I didn't want to live long term, but they allowed me to trade up.

The 3rd property was in the right town, and where we started our family, the 4th the right location and size, and where we remain to this day.

As our children now move into the property market they are skipping over the first two rungs of the ladder, based on their own earnings, but still taking on more debt than is strictly necessary in the process...

B0bbyEwing

Petriix said:

Typical house at £300k, 

Wow. 
£300k would get you a decent detached around here. 
Our semi was 150. Now valued around 220. 
Though appreciate 300 might get you a shoe box in London. 
400 if you want one with a lid maybe.

RogerPensionGuy

Sea_Shell said:

At least with buying they (hopefully) end up with an asset.

Some BOMADs are gifting substantial sums to pay RENT!! 

Yes and some BOMADs I know have monthly standing orders set up paying children on a completely on-going basis and whenever children need extra cash for stuff like shopping or fuel just a quick phone call and the money is flowing no problems.

It looks to me like some people are living beyond their means, but are lucky to have very nice and able BOMADs just a call away.