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The Bank of Mum and Dad – How to help your child buy a home

Homebuyers are increasingly turning to the Bank of Mum and Dad for help. Here’s how you can help your children get on the ladder, and everything you need to know about gifted deposits, tax implications and Bank of Mum and Dad mortgage options.

Analysis by property group Savills shows that gifts and loans from the Bank of Mum & Dad (BOMAD) will hit a new high in 2021


How can I help my child buy a home? 

There are several ways parents can help their children buy their first home:

  • A financial gift
  • A loan
  • Putting your savings in a linked account
  • Acting as a guarantor on a mortgage
  • Getting a joint mortgage


What are the advantages and disadvantages of the Bank of Mum and Dad?

Gifting money to help your child buy a house can be wonderfully generous, but it can throw up some problems. Here’s the pros and cons of using the Bank of Mum and Dad.

Pros of using Bank of Mum and Dad

  • A tax-free gift. Provided the parents live for seven years after the gift the money will be tax-free. It also helps parents reduce the size of their estate, which can reduce a future inheritance tax bill.
  • Lower monthly repayments. The Bank of Mum and Dad can help people put down a bigger deposit on their first home. This means they can borrow less and possibly get a lower interest-rate, which means lower monthly repayments.
  • A better home. By helping boost the deposit the Bank of Mum and Dad could help their child buy a better property. Whether it is a slightly bigger home, or in a better area this could mean your child doesn’t need to move again in a couple of year. This could save them thousands in the cost of buying and selling property.
  • Better mortgage choices. A bigger deposit can open up the mortgage market with more deals to choose from.

Cons of using bank of Mum and Dad

  • Reduced mortgage options if loaning rather than gifting. Loans from the Bank of Mum and Dad can have repercussions on your mortgage. Some lenders won’t accept lent deposits as it means someone else has an interest in the property.
  • Additional information required by lenders. Mortgage lenders, estate agents and solicitors can all request to see proof of funds. Parents can have to show evidence of where the money they are gifting has come from. This can mean presenting numerous bank statements and certified ID.
  • Relationship breakdowns. These days most people buy a home with a friend or partner. In the event of that relationship breaking down you could find your child’s ex waltzing away with half your money. Prevent this by getting a deed of trust drawn up.
  • Family friction. If the Bank of Mum and Dad lends to one child in a family it can cause friction with other children which overshadows their relationship forever more.
  • Smaller savings. Gifting money to your children could leave you struggling in the future. Before you open up your own branch of the Bank of Mum and Dad assess your finances and work out how you can afford to help.

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