With an increasing number of young people struggling to get onto the housing ladder, an increasing number of parents are having to help their children financially.
62% of under 35’s received help from families with their home purchase. The average contribution of friends and families to help their loved ones buy a home has increased to £24,100 in 2019. The ‘bank of mum and dad’ lending totals £6.3billion in 2019*.
At Four Wealth Management, we have seen an increase in the popularity of Intergenerational Mortgages.
What is an Intergenerational Mortgage?
St. James’s Place, in conjunction with Metro Bank, has designed a range of mortgages specifically for families. The St. James’s Place Intergenerational Mortgage Range, exclusively available to St. James’s Place clients, allows your family to choose a mortgage that works for you all.
Although the St. James’s Place Intergenerational Mortgage Range is specifically designed to support families with affordable mortgages, it is still important that the property purchaser can actually afford the chosen mortgage. Your St. James’s Place Partner will help you select a mortgage that suits your family’s unique needs and circumstances.
In addition to the St. James’s Place Intergenerational Mortgage Range, we assess a comprehensive range of first charge mortgages from across the market, that lenders make available to mortgage intermediaries, to ensure that we offer the right solution for you and your family.
The home on which the mortgage is secured may be repossessed if repayments are not maintained.
What options are available through the Intergenerational Mortgage scheme?
Joint mortgage application
Parents and grandparents can now help their young relatives with monthly mortgage payments by jointly applying for a mortgage with them. The bank then takes the multiple incomes into account when calculating the maximum loan amount. The higher the combined income, the higher the loan amount.
The Intergenerational Mortgage is offered by Metro Bank and if approved, you would be liable for the monthly repayments if your relative fails to keep up to date with them. Unlike most other lending banks, Metro Bank does not require you, as a joint applicant, to be registered on the property deeds. This means you avoid exposure to Stamp Duty and other tax implications of you purchasing a ‘second property’. Please note that although you may not appear on the property deeds, jointly obtaining a mortgage will affect your credit score.
Help your loved ones with saving a mortgage deposit
One option through the St. James’s Place Intergenerational Mortgage scheme is that you and your child/grandchild contribute towards the deposit so that they can get a more affordable loan-to-value mortgage and interest rate which will reduce the monthly interest payments during the term of the deal.
The St. James’s Place Intergenerational Mortgage scheme will allow you to gift assets towards the deposit using the Money Management Account facility which means investments do not need to be encashed so there are no tax or withdrawal charges to pay. When your child/grandchild is able to, they can repay the Money Management Account.
Intergenerational Mortgage with a Secured Deposit Account
If you wish to maintain control over your assets but also assist your loved one, you could consider a St. James’s Place Intergenerational Mortgage with a Secured Deposit Account. This is a non-interest bearing account that is linked to your relatives’ mortgage. It provides extra security to their mortgage which reduces their monthly payments, yet the assets remain in your name and you do not need to gift anything.
The Secured Deposit Account can be funded with cash or existing St. James’s Place eligible investments. You can only access your Secured Deposit when your relative has re-negotiated their mortgage once the deal term has ended or if the mortgage is fully paid off. Please note, if your relative does not keep up with the mortgage repayments, the Secured Deposit may not be returned to you.
Borrowing against the investments, may adversely impact the gifting individual’s own financial plans. Control of the gifted money or investments would immediately be lost.
Why should I consider an intergenerational mortgage?
If you are looking to help your child/grandchild to get onto the housing ladder, an intergenerational mortgage can make home ownership achievable. Family wealth can help provide extra mortgage security and potentially reduce the interest repayments.
An intergenerational mortgage also allows you to continue your own financial planning while
supporting your family. Find out more about our mortgage service.
*Legal and General, Bank of Mum & Dad Report, 2019