Getting onto the property ladder is on many people’s to-do list. But securing that first mortgage is not always simple and straightforward.
One of the major hindrances is securing the personal capital to afford the deposit and start your journey towards home ownership.
There have been many schemes and initiatives to help people looking to get onto the property ladder. The Help-to-Buy scheme for one has been a way of encouraging people to plan, save up and commit to purchasing their first home.
But such is the situation at present that many young people are making pretty significant withdrawals from the ‘Bank of Mum and Dad’ in order to secure their first mortgage.
For many people, securing a mortgage is one of the many steps one takes as they move through the years.
Having that first property you can call your own is a rite of passage for many people. It can be a source of pride and personal status.
But it’s no secret that a pretty tidy sum has to be saved up and paid in order to achieve this goal. And according to recent research, young people securing that sum by their own means is not happening as frequently as some may think.
This is not hindering people from securing their first mortgage thanks to some parental assistance however.
According to research commissioned by Legal & General, 56% of first-time buyers under the age of 35 received financial input from their parents when making their first home purchase.
71% of those surveyed admitted getting onto the property ladder as quickly as they did would have not been possible without this parental financial support.
These funds in many cases may have come in the form of a gift or as part of inheritance. But the research indicated that 30% of those surveyed would have to pay at least some of the money they had received back to their parents at some stage.
What’s behind many people’s reliance on parents to support their home purchases? There are many factors at play.
One is economic, with the cost of buying a house far higher today than it would have been for many people’s parents. Though wages are all generally higher today, the rise of house prices and wages have not been equal. This has hindered many people’s chances of being able to afford a house using solely their own funds.
Parents who bought their own houses in the 1970s, 80s, and 90s also did so at a time when purchasing a home was being championed by the government of the time – a sentiment that may well remain and be shared with their own children.
Many young people are more than willing to capitalise on the generosity of parents, and view getting on the property earlier thanks to such monetary gifts as a good move.
What is clear is that many first-time buyers are using funds given to them by parents to make that first step onto the property ladder, and many are more than happy to do so.
In a similar way to how the mortgage market has changed since the 1980s, the world of work has changed too.
Many people below the age of 35 today work in a freelance capacity or as a contractor. This is a great way to earn money, but can make it tricky to secure a mortgage without expert help.
Of course, central to any first-time buyer mortgage is a healthy deposit and being able to prove the stability of your employment.
Therefore understanding the challenges facing both first-time buyers and freelancers and contractors is vital to securing the mortgage you want. Regardless of how the funds are acquired (within reason!), investing in your own home is always a strong move. The Bank of Mum and Dad may be helping many, but the rewards are great.
Parents and First-Time Buyer support
The importance of the Bank of Mum and Dad
First-time mortgages as a freelancer or contractor
