Parents pool funds with kids to finance home purchases

Amanda Jarvis

April 25, 2006

By buying a property jointly, parents can help their children onto the housing ladder by boosting their affordability and enabling them to buy a home that would have otherwise been out of reach. Both the parents and their son/daughter are named on the mortgage deed, and the lender bases its decision as to how much it will lend on the combined income of all the applicants.

Typically, the available mortgage is calculated by subcontracting the parents’ own mortgage repayments from their income and multiplying by four, then adding in the child’s own salary.

Philip Davies, chief executive of Linden Homes commented:
“Buying jointly with parents is becoming increasingly popular as children struggle more and more to fund their own first home purchases. Gifted deposits have been a common solution in the past, but as property prices rise even further out of reach of starting salaries, bridging the affordability gap becomes a bigger problem, especially in London and the south east.”

A joint purchase requires a much greater commitment on behalf of the parents than a gifted deposit, but there are advantages for the parents too. They are likely to have more input into the choice of property and closer control over decisions made concerning their investment than if they had simply gifted a deposit. In addition, joint purchases can be a great way for parents to make an additional property investment whilst assisting their child in their first property purchase.

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