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The most popular lender in the UK ?….Mum and Dad

 Current interest rates are at an all time low. As well as causing pain for savers, there is little gain for house hunters, as major lenders are refusing to pass on interest rate cuts to purchasers. Furthermore, lenders are asking buyers to put down a significant deposit, or pay a more expensive mortgage.

Nationwide, one of the UK’s largest building societies, charges an increased interest rate if the deposit is less than 25 per cent.

The demand for property has increased significantly in recent months, with many potential first-time buyers exploring the market. A sizeable majority of these buyers will request help with their deposits from one major source only- ‘the bank of Mama and Papa’- with an estimate of 8/10 London first-time buyers requiring parental deposits.

At Fridays, we see parents making contributions, rather than paying outright, for the property.

It is important to heed the following advice when purchasing property with parental assistance:

Be sure to inform the following parties of the arrangement:

1)     The Conveyancing Lawyer

2)     The Mortgage Broker

3)     The Lender

When purchasing a property, the conveyancing lawyer is duty bound to advise the lender whether the monetary balance is being provided by a third party. By making this clear, there is less risk of the lender saying that they were unaware, and possibly withdrawing or adjusting their offer. This could then either cause delays or jeopardise the transaction. Lenders are more inclined to provide a loan on a property if the balance of the purchase price is a gift from parents, as opposed to a loan. The reasoning behind this is that, in the unlikely event of repossession, a lender does not want to be involved in a dispute of whether parents should have their loan paid off first.


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