How to Help Your Child Become a Home Owner
The property ladder may seem a scary prospect for the younger generation especially with the high property prices at the moment.
There are ways you can help your child get onto the property ladder, here is how you can make their home ownership dream into a reality.
1. Help them understand the Basics
Take time to sit down with your child and answer questions they may have. The process is a big step and it can be confusing and complicated. There are different processes and terms that can be overwhelming such as “completion date”, “vendor”, “stamp duty” and “solicitors”. There are plenty of online resources that can help with the descriptions and should provide them with some good reading material about the different processes they will go through.
2. Teach them to Save!
Do you remember the first time you got paid? The excitement of being able to spend all the money on anything you wanted! Have a conversation with your children about starting a savings account so that they have somewhere to put money away and not be tempted to spend it! Sit down and assess financial situations, talk about expenses they currently spend so their phone bill, food or social life etc. and try to create a budget to try to save each month.
3. Talk through the Costs
After having the discussion about saving money, make sure they understand why they need to start saving. There are many different payments that will be required when buying a house. By learning to save they are able to be prepared for when they have to pay a mortgage. When it comes to getting a mortgage, a deposit is required. Lenders will want to see that your child has the ability to repay loans and manage their money wisely, it is important that their money situation is in order before applying for one. It is a hard process, there are fees, taxes, renovation costs not just the fun bit of decorating and furnishing the house.
4. Bank of Mum and Dad
Some relatives contribute everything they can to help their child get a deposit. This is great if you want to help them but do think about the consequences. Your child needs to be financially secure themselves to be able to afford the loan repayments and may not understand the hard work and effort that goes into repayments if you just give them a large chunk of their deposit. Think of the implications it could have on your child’s situation, let them learn about responsibility.
Relatives often loan their children money, but this can put a strain on family relations if repayments aren’t met. This can result in arguments. There is a solution, some lenders now offer “a parents to child loan service”, this means the strain is taken off you. All of you sit down together and set terms and agreements of the loan and it is all organised by the lender. This means more protection on all assets and savings, then less chance of family arguments.
With your good advice and a shoulder to lean on, your children shouldn’t find the house buying process too much of a struggle. Here at Alexanders are open 7 days a week so if you and your child wanted to come in and ask for some advice, even if you are not buying with us we would be happy to help you.