The Bank of Mum and Dad

The Bank of mum and dad.

Apparently the age of a first time buyer without help from their parents is 37. That’s pretty shocking and is a damning indictment on the level house prices are at.

If you can’t afford to buy a house on your own what should you do?
You shouldn’t borrow off your parents. That’s one rule I’m very firm on! Whilst people are lending their kids massive deposits it’s just keeping the house prices high! If no one could afford to buy a house then house prices would drop!

If you don’t want to live with your parents all your life then rent! Rent a room in a shared house and it’s cheaper than living on your own. It’s also good life experience to share a kitchen and bathroom!

Why do some parents lend the money? Because they feel perhaps that renting is dead money – but having to borrow a deposit as well as the child having to pay a mortgage stinks of dead wasted money to me!

How will the child pay the parent back? If you can’t afford to save a deposit then how will you pay back this other loan?

People often say they really want to buy a house, but can’t save. When you ask them to do a statement of affairs (SOA) then you see where they spend their money. Often they have quite expensive social lives. It’s that money that needs to be saved and put aside to build up a deposit. If you have no spare money for a social life then you probably shouldn’t be looking at buying a house just yet.

Options are to cut down what you spend; this can involve finding somewhere cheaper to live perhaps, or increasing your income. Sometimes investing effort into your career can pay dividends and increase your income. Some people get second jobs to ensure they have spare money. Another job also solves the problem of having a social life as you run out of time and energy with two jobs!

Borrowing money to get a deposit together is the same as borrowing 100% of a houses value. And we all know where 100% mortgages got people! There’s a survey out there that shows the bigger your deposit the less likely you are to get into arrears with your mortgage. Simply put: if you have saved a deposit yourself then you are more prudent with money and better able to cope with the responsibilities of a mortgage!

Harsh, perhaps but what if you borrowed £50,000 from your parents to buy a new build? New builds drop in value quickly – they stop being new builds as soon as you move in, and you pay for a new build premium too. Your house is worth less than you paid and your parents have a debt you can’t afford to pay back. This strikes me as insanity itself!