Bank of mum and dad mortgages

Postik

When the time comes I don't think I will be helping my kids get onto the property ladder.

I'm lucky that I live in a cheaper part of the country (i.e. not London or the South).  So houses are cheaper around here.  I bought my first house in my twenties for approx £120k.  I'd saved up £80k at the time which was no easy thing.  I sold it recently for approx £250k.  Okay, it's doubled in price, but then so has everything else in that time (the minimium wage, cars, etc).  There were plenty of people back then unable to get on the housing ladder, so it's not a new thing, although I think it gets progressively harder every few years.

I now live in a half million pound detached house with a small mortgage.  My parents never gave me anything towards my house.  I'm not a huge earner and always had just a single income, but I am very good at saving. I've had 3 cars in my entire lifetime where some of my friends have had dozens.  We go on one cheap holiday a year, whereas everyone else I know goes abroad.

I tend to keep my mobile phone for 4-5 years before I "upgrade".  I'll never spend more than £250 on a phone and I'll just buy it outright.  I don't pay for any TV packages or any nonsense that I don't need or won't use.  The whole world has become somewhat of a scam where everything needs to be paid for "monthly" which slowly bleeds you dry.  I try and avoid monthly expenses as much as possible and buy what I can outright.  I avoid all types of insurance apart from the absolute essentials.  The only thing I really waste money on is takeaway, although we've cut down on that a lot in recent years.

I see lots of kids with the latest iphone, driving around in brand new cars, wearing designer clothes, going on holidays abroad.  I'm guessing some of these people will complain they can't get on the housing ladder.  I don't know if they are just terrible with finances or if they would rather blow their money on stuff they can afford rather than save up for something that is very difficult to attain.

My own kids are now getting a bit older and asking for "Nike" trainers and the like.  I tell them if I'd spent the last 20 years walking around in Nike trainers they'd be sharing a bedroom now in a rented house.  My daughter asks if I'm embarrassed being seen wearing Primark trainers, and I say, why would I care what people think?  I often threaten to draw a little Nike tick on them with marker pen just for a laugh.

For me, it's never been about how much I can earn, but rather how much I can save.  A lot of it is a frame of mind.  You could earn hundreds of thousands a year and blow it all every year and still be poor.

Jaco70

murphyslaw2020 said:

I feel if they haven’t got the discipline to save for a deposit by themselves or with a partner, then I would question their ability to pay a mortgage. it might be better to rent. 

Ideally stay with parents until they can get the deposit together.

It’s a valid point but not one I personally agree with.

My mum paid my 5% deposit, which I was hugely grateful for, but even though it was 25 years ago and my pay at the time was rubbish, I could still have put the £1775 on a credit card if needed.

Youngsters today, and in particular those without BOMAD, have it much harder. I can’t honestly imagine how demoralising it must be to scrimp to put aside maybe 15k in a year (a huge achievement for a young person), whilst house prices in your area jump 20k during the same period. 95% mortgages should be the norm again, not the exception.

I’m also surprised that nobody on here has yet commented how most people rent in France / Germany / Outer Mongolia, and are very happy to. As if it’s in some way relevant. 

B0bbyEwing

bluelad1927 said:

justwhat said:

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.

Exactly this!

The average house price in the UK is £285k 

That is likely to be a 3 bed semi suitable for a family of four in many areas.

What makes people think they are entitled to start off at this point.

I'd have to say .... no, not exactly this at all.

"You have to start at the bottom and work up"
"You [must?] buy the cheapest house you can find".

No, we all have our opinions and mine is to disagree with that totally. 

"People seem to not want to start at the bottom" - I'll agree with that (talking purely about myself, nobody else. I can't fathom who would WANT to start at the bottom. Doing it because you have to, yes, but WANTING to? No). 
"or move areas based on affordability" - nope, I don't want to move area (depending on what we call "moving" because I'm happy where I'm at.


I decided quite early on that I didn't want to be moving house constantly. I saw it as a big waste of money & faff, this constant moving. My aim was to buy a house I'd be happy to stay in. 

And so I saved & saved while staying at my parents, finally buying the house when I was 29-30 in 2013.
House was in the 150-160 range, I put down 55k while at the time I was earning about 14-16k/yr. 

If I'd have gone for the cheapest house I could find then I'd have bought a 100k terraced house in a rough area. I didn't want it. My goal was to save for longer for a nicer house. 

Ksw3

As a society we have decided that possessions and money, give  status. Advertising is everywhere telling you to consume, items made to break so you buy more, the government obsessed with growth (I.e greater consumption). Magazines, radio ads, TV ads, emails, texts all trying to get you to buy. Payment plans, 0% credit all to encourage spending.  

It felt like pre covid, it was stop eating avocado on toast, during covid it was why aren't you out eating avocado on toast to support the economy and now we are back to stop eating avocado on toast perhaps until the recession hits and then it will be back to get out there to boost the economy! 

silvercar

Not everyone has the luxury of living with parents in order to save deposits, either because their parents don’t have the room or because they are in the wrong location. Renting and saving is hard.

Postik

silvercar said:

Not everyone has the luxury of living with parents in order to save deposits, either because their parents don’t have the room or because they are in the wrong location. Renting and saving is hard.

Almost impossible I would imagine in some cases, especially where property prices and rents are high.  I mentioned in a post above how I've always been good at saving - that still applied after getting a mortgage but only because my mortgage payments have always been low.

If you're paying over a grand in rent each month then saving is going to be very hard, especially now that everything else is so expensive to boot.

Ksw3 said:

As a society we have decided that possessions and money, give  status. Advertising is everywhere telling you to consume, items made to break so you buy more, the government obsessed with growth (I.e greater consumption). Magazines, radio ads, TV ads, emails, texts all trying to get you to buy. Payment plans, 0% credit all to encourage spending.  

It felt like pre covid, it was stop eating avocado on toast, during covid it was why aren't you out eating avocado on toast to support the economy and now we are back to stop eating avocado on toast perhaps until the recession hits and then it will be back to get out there to boost the economy! 

This is one of the big problems with society I think.

I have a bit of an OCD where when I buy stuff I always find fault with it, no matter how minor, and usually I end up not happy with whatever I've bought.  So I generally try and avoid buying things now.  Problem solved!

If I buy a new car I will spend 12 months wasting time babying it, then lose interest and it will stand filthy on the driveway forevermore.  The easy solution is just to keep my old car - no inclination to baby it and no feeling guilty that it's standing outside filthy, because it's old anyway.

On the plus side, I generally take very good care of my things, so stuff like my car (aside from being dirty), my phone, laptop, house, etc always look in good condition and newer than they actually are.

[Deleted User]

If you comfortably have the funds. 

Myself and my siblings didn't have the bank of mom and dad but good financial backgrounds and emphasis on education.

Now in my 30s with decent career, savings and property. 

Will say it is important to be financially responsible. A lot of people focus on the short term and spend excessively to impress people. 

I started young buying and selling on ebay, got a part time job aged 17. By 18 was already saving in M&S sharesave scheme. 
Invested some of my student loan money. 

It is also having a good balance generally enjoy life and not be too frugal. 

I will probably be in a position to help my future children but don't want to hand everything easily. 

Also i have been business savy from a young age so focusing on one's strengtht.

Financial education is so important and also investing in good education not necessarily private school but a decent education and getting a decent career helps.

For me a well paying career but also saving/investing.

Sg28

justwhat said:

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.

The problem is most first time buyers are at the age where they either already have or will soon have kids. Buying a 1 bed "starter home" isnt going to be any good. 

Even those sorts of houses near me are £250k+ now. 

simon_or

If you have the money spare, then there's absolutely nothing wrong with helping your kids towards a deposit to buy a house. It's a personal choice.

My parents gave me some money and I'm grateful that they did that. I would've still been able to buy without their gift but it still helped reduce my loan size and lower the cost by improving the LTV.

As my father said, the increase in value of their small terraced house in Hackney exceeded his net wages over many years, and in his opinion was just pure luck, born at the right time when a working class salary in London could buy an average house there, bought a house in a run-down deprived area which later became red-hot and gentrified. So he doesn't think of it as hardship at all to use some of that cash to help his offspring buy houses of their own.

When the time comes, if we have money to spare when our children buy a house, we'll definitely help them as well, whether or not they can buy without our help. Personally, I'd rather gift away any death estate while I'm alive and my kids are of working age than wait until the end.

MWT

simon_or said:

As my father said, the increase in value of their small terraced house in Hackney exceeded his net wages over many years, and in his opinion was just pure luck, born at the right time when a working class salary in London could buy an average house there, bought a house in a run-down deprived area which later became red-hot and gentrified. So he doesn't think of it as hardship at all to use some of that cash to help his offspring buy houses of their own.

Exactly, that is a largely unrepeatable value increase which has resulted in many of that generation having more value in their home than their pension fund...

Not uncommon to have achieved an annual growth in property value of around 7% over the last 25 years, taking an £80k property to over £500k.

Not likely to see that sort of sustained growth any time soon...