The Bank of Mum and Dad (or as it is affectionately know at Mortgage Required – BOMAD) is now equivalent to one of the UK’s top 10 mortgage lenders and is set part with over £5bn in 2016, according to research from the Centre for Economics and Business Research.
It estimates parents will be involved in 25 % of mortgages transactions taking place in the UK this year, helping with the purchase of around 300,000 first homes.
On average, parents stump up £17,500 to assist their children, some insisting it is paid back with interest, some ask for repayment upon the sale of the property but over half of parents helping out give the money as a gift.
On the one hand, mortgage lenders love BOMAD, it adds equity to the purchase and reduces their risk, but most don’t like lending where the money has been lent by the parent. Future family fall outs and a lack of “something in writing” can cause problems down the line and sometimes compromise their security.
Back in the day, there was no BOMAD, but there was 100% lending so nobody needed it anyway. I have it on good authority that one high street lender is in the market for 100% lending – watch this space!!
For more information speak to a mortgage advisor on 01628 507477.
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