The Bank of Mum & Dad Should Plan Ahead to Help Their Offspring

The Bank of Mum & Dad Should Plan Ahead to Help Their Offspring

A recent survey from the Centre of Economic and Business Research (Cebr) and Legal & General, suggests the Bank of Mum & Dad will be lending their children £6.5 billion in 2017, in order to buy a home. That’s up from the £5 billion they lent in 2016 and should assist their children – of a wide range of ages – to purchase 298,300 homes.

Those figures put the UK’s parents on par with the country’s ninth biggest mortgage lender, the Yorkshire Bank, who lent £6.6 billion in mortgages over the course of 2016. But, while many parents are dipping into their savings in order to provide financial support to one or all of their offspring, there is another way.

Plan Ahead with the Right Investment

Some savings schemes are well thought out and incorporate Investment Funds and other options. However, that’s not the case for every parent who provides significant financial support to their children. However, a little forethought, could change that.

As your children near the end of their teens, parents could look into property investment options to equip themselves with enough money to support their children’s first step onto the property ladder, in the not so distant future.

This could take the form of buying the right rental property act auction, getting it ready for the private rental sector (PRS) and making sure the rent covers the mortgage and any additional running costs for the next few years. In the meantime, as well as paying for itself, there should be at least some capital appreciation – however small.Then, when your children are in need of financial assistance to get them on the property ladder, or to start their own venture, you have a range of options. They include:

  • Selling the property to fund their needs.
  • Re-mortgaging the property to give them the money they require, while retaining your investment.
  • Sign the property over to them and let them take on the mortgage and repay some, or all of your deposit upon the future sale of it.

Make the Most of the UK’s Rental Needs

If you’re in a position to do so, becoming a landlord in the UK’s PRS, even for a short time, could put both yourself and your children in a stronger financial position. It could even enable you to help them take their first significant financial step, without reducing your savings, pension pot or other investments.

Of course, not everyone is in a position to plan ahead and become a property investor. In addition, not everyone agrees they should assist their children with buying their first home.

But, without some financial help, some ‘children’ won’t be in a position to purchase their first home until they’re nearing their 40s. By helping to bring the timing forward, even just by a few years, could make a big difference to your children’s life – and yours, too!

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