FIRST TIME BUYERS

Smart Money




HOW TO GET ON THE PROPERTY LADDER IN 2020

How can parents help get their children on the property ladder? Is it all down to the 'bank of mum and dad'?

GIFTING

The larger the deposit a first-time buyer can put down, the better the mortgage rate the lender can offer, so many parents choose to gift a sum of money that will form all or part of a deposit.

Just remember that a cash gift can incur up to 40% inheritance tax (IHT) bill if the giver dies within seven years of the money being given. You’re also allowed to give away up to £3,000 a year without it counting towards IHT.

You can also gift your child a regular amount monthly as a ‘gift out of normal expenditure’. This allows you to give away an unlimited amount of ‘surplus’ income, and it’s free of IHT as long as the gifts are regular and don’t impact on your normal standard of living.

LENDING

Some parents may prefer to lend their children their money, with it being paid back monthly or when the property is sold. The parents would need to set out any interest payable and the repayment schedule on a loan document that is signed by both parent and child. This will also need to be disclosed to the mortgage lender and factored into the affordability check.

SHARED OWNERSHIP

Parents can also become shared owners of their child’s property. Both the parent and child are named on the mortgage and deeds. The size of the loan will be based on the earnings and assets of both parties.
Be aware that for parents who already own property, this will be regarded as a ‘second home’, which means you will be charged a higher rate of stamp duty on the transaction.

GUARANTOR MORTGAGES

"Another option is a guarantor mortgage arrangement, where a parent or grandparent provides a formal guarantee to the bank; either to assist with affordability checks, or with additional security (e.g. a cash deposit or another property). The guarantor would be liable for any missed mortgage payments" says Bertie de Klee, Private Banker.

This could enable a child, who would need to be earning an income, to borrow a higher loan sum than if borrowing solely – often far in excess of the usual high street bank ‘income multiples.’

WEATHERBYS & YOU

At Weatherbys Private bank, in addition to bespoke lending solutions tailored to your needs, your Private Banker can also offer investment advice.  

When clients come to us looking to invest, we will occasionally recommend an active investment manager.  What we will always do is recommend to our client that they choose the solution which will keep costs down.  

For this reason, many clients find that a portfolio of tracker funds is the right option.  We help them create the right balance of tracker funds in their portfolio and then ensure that it doesn’t drift over time. And, true to the low cost philosophy, we don’t charge a penny for this service.

FIND OUT MORE

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LENDING

At Weatherbys, we take a personal approach to lending, creating tailored, flexible mortgages and bespoke lending solutions to meet your needs

DEPOSITS

At Weatherbys, we take a reassuringly conservative approach to managing our balance sheet going above and beyond industry standards to ensure your money is safe and secure.

INVESTMENT & WEALTH ADVICE

We go above and beyond to help you achieve the very best financial future.

Past performance is not a guide to future performance. The value of an investment and its income can both increase and decrease and you may not get back the full amount originally invested. The value of overseas investments will be influenced by the rate of exchange.