Children supporting parents with mortgages

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 02. August 2022

Looking to speak to mortgage brokers about children supporting their parents on a mortgage.

  1. Have you had any cases where children have supported their parents with mortgages? What was the situation?
  2. What circumstances may a child help out parents with a mortgage?
  3. Do you think this will become more common?
  4. What is the lending landscape like for this kind of transaction? Are there a lot of lenders in this space?
  5. What advice would you give to children looking to do this?

3 responses from the Newspage community

Children helping parents out on a mortgage isn't something I have come across much, a lot of the time the scenario brings up issues around the mortgage term (due to the parents age), meaning the repayments become too much, especially when you explain how this will then impact on their own ability to get a mortgage in the future (as their liability on the parents' mortgage will reduce the amount they can borrow for their own home). I have had a number of cases hereby the children have purchased a property for their parents to live in, without the parent being party to the mortgage. This generally solves the issue around the mortgage term, which in turn helps reduce the negative impact of this mortgage on any future borrowing the children may want. Either scenario is certainly one to get good, professional mortgage adivce on, as there are many potential pitfalls and the costs and ramifications of making the wrong decsion can be severe.
Although it’s more common for a parent to support a child on a mortgage application, it’s certainly possible either way around. In fact, some modern mortgage lenders will allow virtually any two (or three or four) people on a mortgage application together. Each party can even have allocated amount of property ownership or equity, which they can track and pay towards, if required. It’s about time the rest of the industry also looked for ways to better support property buyers given how tough it is out there. Guarantor mortgages ended a few years ago, but these were replaced by the snazzily named, ‘joint borrower sole proprietor’ or JBSP. This basically means more than one person can be on the mortgage application, but they don’t have to all own the property. Whilst, this might initially seem like a great way to bump up affordability and also potentially save on stamp duty and preserve first time buyer allowances, borrowers need to think carefully about JBSP as the non-owner will take all of the risk of a mortgage, without any of the benefit of property ownership. It’s important that anyone considering this route takes expert mortgage and legal advice.
1. Have you had any cases where children have supported their parents with mortgages? What was the situation? Yes, I actually see this more often that parents helping the children. Mostly this is the case where a parent took out one of the ever so popular residential interest only mortgages in the 80s with no repayment strategy in place and is now at the risk of repossession as they are returned and do not have the income to support a capital repayment mortgage but also do not want to go down the equity release route and its in the children’s best interest for them not too so they can receive a larger share of the estate upon the parents death. 2. What circumstances may a child help out parents with a mortgage? Children are younger so term can be longer to increase borrowing. Children are in their prime work age so likely to be on much higher salaries than the parents which again means they can borrow more by having the child on the application 3. Do you think this will become more common? Yes absolutely for the reasons above but even further compounded by our ever growing aging population 4. What is the lending landscape like for this kind of transaction? Are there a lot of lenders in this space? Yes, there are some standout players like have new innovative ideas but the joint borrower sole proprietor mortgages have been around for years 5. What advice would you give to children looking to do this? If you already have your own main residence then great go ahead and help out, if not it may be best to get yourself on the property ladder first as being on a mortgage already you will lose your first time buyer privileges and may struggle to borrow as much as you need for you’re your own residential mortgage