With property prices having fallen over the last few years it is the perfect time to take that first step on the property ladder.
Gone are the days when 100% mortgages were on offer and therefore lenders are now demanding large deposits. First time buyers who are keen to purchase and take advantage of the lower prices need to find a substantial deposit to have any chance of getting on the first rung of the property ladder. Figures from the Council of Mortgage Lenders show that first time buyers now have to pay an average deposit of almost £32,000; this is more than twice the average deposit of £13,194 required in September 2007.
Having a deposit means the first time buyers can obtain better mortgage deals and it also provides a buffer to prevent falling into negative equity if property prices decline further.
It seems almost impossible for many first time buyers to save this amount of money. Therefore numerous of these first time buyers are turning to the bank of M&D (Mum and Dad!). Parents are now finding themselves in a situation where they need to help their children find a deposit. According to Lloyds Banking Group, a fifth of parents give their children money to help them on to the housing ladder.
Quite often the parents will have a family home that has increased in value over the years meaning the recent down turn has not caused them a huge loss. However, they may not have spare cash to give their children as all of their equity is tied up in their property. The parents may be reluctant to sell the family home and to downsize. Instead of selling their homes, many parents are now making use of equity release schemes which are also known as lifetime mortgages. These schemes essentially allow you to borrow money against the value of your home and the debt does not usually have to be repaid within your lifetime.
Equity release plans can be complicated products and there are many available, therefore if you are considering releasing equity from your home then it is always important to seek the advice of an Independent Financial Advisor.
If you require legal advice or assistance before signing an equity release agreement then please contact us