The Bank of Mum and Dad

Research conducted by Mortgage Strategy Magazine shows that one of the top ten lenders in the UK is Bank of Mum and Dad. Ironically, in a large amount of situations Bank of Mum and Dad do not have the liquid cash to lend/gift funds to their children to help them get on the property ladder and have to remortgage their own property to provide the funds. Therefore, most of the time the Bank of Mum and Dad is actually a High Street lender!

So whilst the Bank of Mum and Dad is a figment of Financial Journalists over imagination, the good news for the Mums and Dads of this world are the High Street lenders are flexing their criteria to make it easier for clients to borrow funds and gift/lend this to their children.

In our experience the typical age of a Bank of Mum and Dad client is over fifty. To help, some lenders will happily lend to clients age 70-75 and some even go as far as 80-94 if you have sufficient post retirement age income.

Bank of Mum and Dad clients will also have a number of different income streams and these can include; earned income, rental income, investment income, pension income, dividend income, retained profit and state benefits. To help, a number of lenders will accept 100% of most types of income and use this in their affordability models to calculate what loan size is available. This is a recent evolvement to better cater for today’s society for tax efficiency and entrepreneurialism.

Finally, Bank of Mum and Dad has seen the reintroduction of interest only lending. This helps by keeping the monthly costs down on the loan/gift and some lenders even offer a higher loan amount than what would be available on a repayment mortgage. Furthermore, the loan/gift is typically designed to be a short term arrangement and repaid within say 5-7 years. Interest only offers greater flexibility for shorter term loans when a repayment vehicle is on the horizon.

So there you have it, The Bank of Mum and Dad is actually more myth than reality. As it has been created by using various parts of the High Street lenders criteria, perhaps we should be calling it the Frankenstein Bank instead!

If you are thinking about raising funds against your property to help your children on to the property ladder, please call 01454 540500 and speak to one of our mortgage specialists.