New figures revealed earlier this month show the Bank of Mum and Dad (BOMAD) will fund a quarter of all UK mortgages this year.
Parents will lend £6.7bn during 2017, up from £5bn in 2016, providing deposits for more than 298,000 mortgages and purchasing homes worth £75bn, according to research from Legal & General in association with Cebr, the economics consultancy.
This research makes parents the ninth biggest lenders. Other research demotes them to tenth place. But let’s not split hairs – they are in the top ten.
So it is clear that if you are a freelancer, self-employed, a young contractor, or new to contracting, the Bank of Mum and Dad could be a resource if you want to get onto the property ladder.
The question to ask yourself is: would your parents help you to buy a home?
In the past, a loan from BOMAD would see your parents handing over a lump sum, which would never be seen again – it would be classed as a ‘gifted deposit’. They would have the satisfaction of knowing they had helped you, but that would be the only return they’d see.
Now things are different, and your parents could actually see a loan to you as an investment tool.
Bank of Mum and Dad: what are the options for young contractors?
Before you approach your parents, do some research. If you can go to them armed with some useful information, you’re more likely to get them on board.
Firstly, you may not need a deposit. You may just need your parents to, effectively, underwrite your mortgage payments.
One product that offers this is the Barclays family springboard mortgage, where instead of a deposit you provide security for 10% of the value of the mortgage – this is where your parents come in. They provide a 10% deposit of the property value, this is invested into a savings account and as long as you keep up your payments they will receive all their money back after three years with interest!
Add to that innovations like the Government’s Help to Buy scheme and the Lifetime ISA, all aimed at young people getting on the property ladder, and homeownership may be closer than you think.
These are just one or two ideas to get you started on your research. And the team at Contractor Mortgages Make Easy are full of useful help and advice for young contractors and freelancers who are first time buyers.
Media Contact: Sarah Middleton, Public Relations Manager
Tel: 01489 555 080