Good Information Articles

Parents: helping your child onto the property ladder

It?s increasingly difficult for young people to get on the first rung of the property ladder alone, as property prices are rising much more quickly than earnings. This is where parents can help. Just as mortgages shared by friends are becoming more and more common, so too are shared mortgages with other family members. There are even some specifically tailored mortgage products on the market to suit first time buyers whose parents are helping to augment their borrowing capacity to enable them to afford their own home.

In some ways it can be less complicated for first time buyers than taking out a mortgage with friends, as friends will inevitably want to move out after a certain length of time and clear agreements need to be established as to what happens to the property. Mortgages arranged with the help of parents mean that children can often afford a place of their own without having to share.

Although it may be simpler for the child, there are various tax and financial implications for the parents which must be considered before entering into such an arrangement.

There are three ways in which parents can help their children get their own property. The first is where one or more parents acts as a guarantor to the child?s mortgage, agreeing to take on the responsibility for meeting the repayments should their offspring be unable to do so. Their finances will be assessed by the mortgage lender to determine whether they are deemed financially able to take on the liability. It?s likely that the parents will need to be earning a fairly sizeable income to be able to guarantee a second mortgage on top of their own. Most lenders will require the parents to guarantee the whole mortgage amount, although there are some that enable the parents to guarantee just the excess amount (i.e. the amount over and above what their child can afford to borrow based on their income).

When parents act as guarantors, they have no legal claim on the ownership of the property or any equity from it as they will not be listed on the mortgage deeds. It?s a good option for helping your child if you don?t want to have anything to do with the property. It means that you won?t be liable to pay capital gains tax on any profit made from it when it is sold.

If you do take on a guarantee of a mortgage for your child, you will probably only want to do it until they can afford to take on the whole mortgage themselves. Once they?re earning enough, you can have your guarantee cancelled.

Something that you will need to be aware of is that because you are not on the mortgage agreement or title deeds, you will not receive any correspondence about the mortgage from the lender, so if your child is having trouble making repayments you may not find out until you are called to uphold your guarantee.

Another potential drawback is that your child?s mortgage amount will be deducted from the amount you can borrow if you even apply for another mortgage in your own name. If your home circumstances might change or you might need to move house, being a guarantor may not be a wise option for you.

The second method is to take on a joint mortgage with your child, selling or gifting your share to them when they can afford to take it on. You will be named on the mortgage agreement and deeds and will be jointly liable for making repayments. If your child defaults on payments, you will be responsible for covering them. There are other tax and financial implications when taking on a joint mortgage if you already have an existing mortgage.

As you?ll own a second property which is not your main residence, you may be liable to pay capital gains tax on any profit when you hand over your share of the property. Additionally, stamp duty might have to be paid on properties worth over £125,000 as the transaction will be considered to be the same as any other property sale or purchase.

The third option is to gift a lump sum to your child to help them put down a deposit for a mortgage of their own. Ways in which you could do this are to obtain an advance on your own mortgage, remortgage your house to release equity or take money from your savings.

Again, gifts may be subject to tax implications. If your total estate is over the inheritance tax threshold of £285,000, the gift will be considered as part of your own estate if you die within seven years of donating it to your child and tax will then have to be paid on any gift over the £3,000 annual allowance when your estate is settled.

Most lenders are happy to accept deposits from parents, although some may not be keen if you are loaning rather than gifting the money to your child and are expecting repayments with interest, as this could affect their borrowing capacity.

Due to the tax and other financial issues involved in all of these options for helping your child to get their own home, it is strongly recommended that you see a financial expert who will examine your circumstances and provide you with advice on how best to approach the matter.

Author: Benedict Rohan Website: http://www.mortgagenation.co.uk Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages.

Other Article Sites

findabook.com  moneycd.info  a-mortgage.info   about-lemon-laws.info  aboutstudentloans.info
all-about-publishing.info  auctions-articles.info  bestcollege-university.com  bestispconnection.com
biblefolder.com  blogger-website.com  books-used.info  brokers-guide.info  buywindows.info  cable-dsl.info
career-miner.com  carpel-tunnel.info  cashinaflash.info  cashloanreviews.info  casinobell.com  chat-house.info
clearmycredit.info  collegeloantips.info  crones.info  depression-articles.info   dirnic.net  dishguides.info
divers-below.com  expodog.info   financewizz.com  fire-insurance.info  getgood.info  handleit.net   it-idea.info
health-supplies.info  hosting-right.com  insidealert.com  insurance-facts.info  jobs-employment.info
justgood.info  lookgold.net   lowcost-travel.info  money-source.info  myhostzone.info  numisblog.com
peoplesearchfinder.info  pr-articles.info  realeas.com   refinancing-guides.info  spyware-remove.info
telelot.info  the-law.info   toppaid.info  travel-deals.info  travelcorrect.com  wedding-guide-site.com
your-blog.info  your-credit.info

MORE ARTICLES:

Business Opportunity From Home: Online Auctions
business Opportunity From Home: Online Auctions by Kenneth Jorgensen http://www.MakeABiz.com

Doubletree and Hilton Hotels at Seattle Airport Install FlyteBoard Airline Information Screens to Serve Business Travelers
FlyteBoards aid road-warrior guests with real-time airline information at two giant properties.

Your Future Includes Health Insurance, Says Florida Health Insurance Web
"The Democratic Party, if elected on November 4, 2008 will deliver health insurance to every man, woman, and child," that according to Morgan Moran of Florida Health Insurance (http://www.floridahealthinsuranceweb.com) Web, a health insurance web site. Moran spoke after the Democratic Convention in Denver saying, "One thing is for certain, electing Obama means an affordable health insurance plan for everyone.

Seven Steps to Starting Your Internet Business
There is no reason to be afraid of creating an online business. It is a very easy process if you take it one step at a time.

Your Ultimate Guide For Acne Home Remedy
Dermatologists and researchers have been trying to discover the best acne medication. Acne, no matter how miniscule a disorder it may seem, needs adequate attention. These tiny bumps on one's face could elicit major effects on a person. Not only vanity motivates experts to find or formulate the most excellent acne medication. Ridicule for having a pockmarked complexion is often one of the leading causes of low self-esteem among adolescents. What's worse is that this lack of confidence may be brought until one reaches his maturity.

7 Tips To Organize The Perfect Business Meeting
As most of you already know, organizing successful business meetings is all down to a good logistics and planning. Don?t give special attention to this and your meeting could become a total failure. Here we have jotted down seven of the most important tip?s we think guarantee a successful business meeting:

Rare Device Opens Second Store in San Francisco 'Good Stuff for You and Your Home'
Two year old Brooklyn-based design store Rare Device is going bicoastal this fall. The second Rare Device boutique opens in San Francisco in October with an expanded selection of design-led gifts, accessories and clothing and art.

Adaptive Marketing LLC Warns Parents: Police Your Home for Poisons
Adaptive Marketing LLC acknowledges Poison Prevention Week, March 16 to 22, 2008.

How Internet Marketeres Can Create Their Own Powerful Niche... Even In an Over-Crowded Industry!
For some reason, people who look to the internet to make more money or start their own online business are drawn to the internet marketing or home business industries. Ironically, these marketers (and I was one of them!) become affiliates for "make money from home" products, or buy reprint rights for the same, and thus try to sell something they have no experience in.

Oblicore Takes Healthcare Service Level Management to the Next Level : Catholic Health East Experiences High ROI managing its SLAs using Oblicore Gu
Oblicore, the leading provider of Service Level Management solutions, today announced that Catholic Health East has transformed its IT operations using Oblicore Guarantee. Catholic Health East?s geographically diverse IT operations serve nearly 50,000 colleagues across eleven states. After using the solution for one year, the organization has leveraged the solution, along with a strong continual service improvement process, to standardize and centralize its service offerings for:

ACOM EMR Division is Now Healthcare Business Division; Name Change Reflects Market Uptake, Expanding Product Line
ACOM entered the health care software market in early 2005 with its RAPID EMR clinical notes and documentation solutions, achieving "rapid" acceptance in the chiropractic field. In early 2006, the division added a practice management solution, giving it the ability to optimize chiropractic offices end-to-end

Attention Webmasters: Earn Money With Internet Dating Affiliate Program
Webmasters can earn significant revenue by promoting online dating program MatchLink. MatchLink has provided white label dating sites for radio stations and newspapers worldwide and is now offering its internet dating product for affiliate marketing.

Home Made Ice Cream Recipe for Coffee Can Ice Cream
The very best thing about having birthday cake is the ice cream that goes along with it. This delicious home made ice cream recipe can be made with a few simple ingredients and a couple of coffee cans.

Succeeding in Your Home Based Business
Home based business has many advantages but it also has some pitfalls. In order to succeed in your home based business you need to adopt some strategies to manage these pitfalls and ensure that you have a profitable business as well as a balance in your life.

Power Equipment Direct Included in the Internet Retailer Hot 100 List
Power Equipment Direct was recently selected as the one of Internet Retailer's Hot 100 Best Retail Web Sites in the specialty/non-apparel category.