With housing affordability at a crisis point, many parents are asking how they can help their child buy their first home—especially when saving for a deposit feels out of reach. Fortunately, there are several ways parents can assist, each with its own risks and responsibilities.
1. Guarantor Loans
Most lenders require a 20% deposit to avoid costly mortgage insurance. If your child doesn’t have that amount saved, a guarantor loan could help.
As a guarantor, you promise to cover the loan if your child can’t. You also offer security—usually your home—to support the loan. If your child defaults, the lender can pursue you for repayment.
2. A Gift
Some parents prefer to give the deposit as a gift. While this is generous, it might not encourage financial responsibility if the money was easily obtained. Keep in mind that gifting also removes any legal right to recover the money later.
3. A Loan
Instead of gifting, you may choose to lend your child the deposit. This sets clear repayment expectations and encourages accountability. It also gives you more control over the financial arrangement.
4. A Loan with Security
You can also protect the loan by securing it against your child’s property. This offers the most legal protection. If your child defaults, you may be able to recover the money by selling the property.
This option also protects your contribution if the child buys with a partner and the relationship ends. The loan remains secured even during a property settlement.
5. Co-Purchase
Another option is to co-purchase the home with your child. You would then hold a share in the property equal to your contribution. For example, if you pay 10% of the purchase price, you would own a 10% share in the property.
Need Legal Advice on Assisting with a Property Purchase?
If you’re considering helping your child buy their first home, it’s important to understand the legal risks and responsibilities involved. Contact A. S. Laumberg today for clear, practical legal advice tailored to your situation.