Mortgage from Mum-Deposit from Dad



Reports like this one in The Independent show that parents are amongst the UK’s top lenders when it comes to financing mortgages. It says their average contribution has increased by 23% this year to almost £22,000, with almost 30% of the funding going to those aged under 30.

But what is available for young people who don’t have a parent who can help, or those who would rather not ask parents to use their savings to help them get on the property ladder?

 

It would seem many are missing out on a source of ‘free money’ that could help turn their housing dreams into reality. This extra cash comes courtesy of the Government’s Help to Buy Isas.

How they work

Help to Buy Isas are tax-free savings accounts, but they also pay out a generous extra lump sum when holders become homeowners. The Government will boost your savings by 25%, so for every £200 saved you will receive a bonus of £50, up to a maximum of £3000. So for a couple this could mean an additional £6000 added to their house deposit savings.

You can start saving with a lump sum of anything from £1 to £1,000 and then top up the account with up to £200 a month. You earn tax-free interest all the time – and if you go on to buy your first home the Government tops up the account with a hefty tax-free bonus of 25 per cent of your final balance. So, if you buy a home when you have £4,000 in your account, you will get an extra £1,000 from the Government. The most you can save is £12,000 – so your maximum top-up will be £3,000. Everyone saving for a home can have their own account, so couples hoping to buy together can get £6,000 extra cash if they each save the maximum allowance.

If you do not end up buying a home you can close your account at any time and withdraw your money plus the tax-free interest it has earned. But you will only get the bonus money if you buy a home.

Another thing which may help house buyers is Barclays no-deposit ‘family springboard mortgage’ which allows young people to buy a first home without putting down a penny themselves. The proviso is that parents put at least ten per cent of the purchase price in a special savings account for three years as security. Providing their children do not default on the loan they get their money back with interest after 3 years.

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