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Andi:
“Welcome to make your move the podcast designed to help you get on the property ladder and figure out what the hell you're doing once you're up there. From deposits to mortgages, surveys to moving day, we have everything you need to help you make your move. Make your move is brought to you by really moving, the price comparison site for moving home services. Welcome to our first episode!”
Lisa:
“The Bank of Mum and Dad: an awkward phrase with some pretty negative connotations. We even nearly called this episode ‘Am I bad at Adulting or Does Everyone Else Just Have Rich Parents?’ Lots of people have familial support, but it's seemingly only ever really whispered about. So, let's talk about it. Sometimes it feels like the Bank of Mum and Dad is the only way to get yourself out of your childhood bedroom. But why? And if the family bank is not an option, how else do you get out of the box room?
"How did you guys do it?”
Andi:
“I did stay at home after university for a couple of years, but I moved out pretty quickly and rented for quite a few years and then I did the maths on how much I’d been paying in rent, and it worked out at about 30 grand over the years. I just thought, ‘that could have been a deposit…’ And I know that's not the way to look at it because it's a home and you've lived there and you've, you know, that's where you've been. But that was the point where I just went, ‘ohh boy… Okay.’ It just felt shocking, and that is how spending works. Day-to-day, it goes by but actually there's a huge amount. So, that was when I started looking at my options, and for a long time I felt there weren't any options, but I at least started saving and we'll talk about some of the options for that later on.”
Lisa:
“Yeah, and the option of actually staying at home, which I'm doing. I have a lot of friends who aren't doing that and I'm– I’m just lucky because I have that option, so I'm just sort of taking advantage of it. I left university quite recently. Obviously, the idea is to leave, but it's hard out here and Hertfordshire is not a cheap place to live.”
Jez:
“Yeah, well, I'm kind of in between those two stages. I've moved out of my parent’s house, but I am renting currently. And as you said, I’m probably going to look at – in a couple of years – at my finance and be like, ‘well, I could have gotten a deposit.’ But I'm quite lucky in that I did stay with my parents for quite a few years before I moved out, so I have had those years of paying very minimal rent and saving and so that was very valuable. So, now I do have quite a fair bit of savings to go towards a property if and when I decide to buy. I had a big back and forth about whether to rent or whether to save to buy, but I choose renting as it’s the best option for me. Everyone has to choose that for themselves. My parents definitely wanted me to stay and save up more. But I had to make the decision about what I want.”
Andi:
“The prices can grow and as you're saving, suddenly that amount of savings doesn't seem enough, so you stay a little bit longer. If that's your only reason for being at home, it can start to be a bit hard. So, if you're at home and you enjoy being at home, and you can take that time and it's a bit of breathing space, then that's great. But it sounds like you made the right choice for you.”
Jez:
“Yeah, my flatmate actually, we were having this discussion the other day (conveniently) about how he didn't go back to his parents after university. He immediately moved out, and now he doesn't have as much savings as I have because I had that time. But again, it's your own choice when you want to move out and what you want to do, but I – there is value in staying with your parents, at least for a little while get that groundwork of a little bit of savings to carry you into the next stage of your life.”
Andi:
“The sooner you start thinking about it, the better. When you are at home, it's so much better to kind of know that you're saving and maybe put that money away rather than what I did, which was live at home and then really enjoy a cheap life and go out and spend that money rather than saving it and then years later start thinking about saving. So, I would definitely encourage other people to not do as I did.
Lisa:
“Yeah. And we're going to talk about the options of where to put that money instead of... I mean, you can also have fun. I think you’re allowed to do that.
“But I think the perceptions, as well, of the Bank of Mum and Dad, is a really interesting topic. There are a lot of people who are using the Bank of Mum and Dad, and moving out does feel like a bit of a pipe dream. Every so often, articles come out in a particular newspaper… Are we going to name and shame?”
Andi:
“We can say that, you know, The Sun's ‘My First Home’ is often the source of much heartbreak and pain to the First Time Buyer, or the would-be buyer.
Lisa:
“And they always release these articles about these people who are – these very, very nice young couples who've bought this home, seemingly with no help from their parents. They've just saved really cleverly, and everyone should be able to do it. You're just sort of lazy if you haven't, and then at the end of the article it comes out...”
Jez:
“They've lived with parents for the last 10 years. And their parents have a mansion in Surrey.”
Lisa:
“Exactly.”
Andi:
“You know, it’s their parents second home that they've actually taken over. It's, like, in the small print, which I think is really frustrating because you sell this reality of work hard and sacrifice, and it's all these people shouting on the Internet about you. You know, avocados and everything. And it's this generation who don't work hard enough and they don't know how to save. And they all want phones. Well, you know what? Actually, we live – we live in a time that needs phones. We live in a world where our phones allow us to interact with society. So, I'm really just not up for listening to people have a go about people who are trying to get on the ladder and still need to live lives and that's what these articles kind of do.
“So, you think, ‘ohh wow. Look, they saved, like, they must have not gone out for years. They must have never had a takeaway. Ohh, they never bought a meal deal. They're always prepared. They've always got their lunch box. They only drink water.’ You know? and you just think, ‘ohh…it was a lie!’”
Jez:
“It’s idealistic. That is, it's an unhealthy lifestyle. You need to live your life and renting or whatever should be part of that life. Not the entire life that you live.”
Lisa:
“Yeah. And we talked about how it's this perception – especially sort of perpetuated by publications like that – that infantilizes millennials. And with the way the market is going, likely, maybe if not now, then surely in the future, Gen Zs is as well.”
Andi:
“Yeah, you’re children forever. Either you're always at home or you can never do anything right. Or, yeah, it's like just being told off forever that you can't be an adult. You want to be a grown up with a home? You know, when you draw pictures as a kid, it's like a little house! You have a job, you have a house! That's kind of the basics of what growing up looks like.
“So, just having the ability to paint your own walls and have some control over your life and what it looks like... It's such a small thing, but having dealt with awful landlords over the years and having to move because someone wanted to move back in or move because they thought they could get more money… You just want consistency and that's actually what ownership offers you.
Jez:
“Those stories, you know, they're not helpful for anyone in the end, because the people reading it are going to think, ‘ohh I'm never going to do it. I'm never going to move house. Everyone else has just got so much more money than me. I'm struggling.’
“And the people in the article, I don't know whether they get approval on what they say, but they probably don't want to hide the fact that they had a bit of help. I would hope so. I would imagine that they don't want to hide that. But you know, it makes them seem like they're showing off and they're, like, ‘oh, look at me. I'm amazing.’ And then when you find out that they had help... It makes them seem like liars and you don't like them, so no one comes across well.”
Andi:
“Yeah, that work they did isn't nothing. Like, If they did save and they did stay at home and they did try really hard, all of that matters. All of that is really impressive. It's just that it still wasn't enough!”
Lisa:
“Yeah. And if their family helped them as well at the end of the article, people leave it and they share it and they say, ‘oh, it's Mum and Dad, it's Mum and Dad.’
“But if you do have the means to help and you're a mum or a dad, is there really anything wrong with that? It's sort of pitting people against each other and making it this sort of spectacle.”
Jez:
“You kind of just end up having this kind of class warfare. Like, ‘my parents can afford to help me and yours can't.’ And for parents as well, it's not helpful because I think any parent who could help their child get on their ladder will do it. They will do whatever they can. But some parents, obviously, unfortunately, just don't have the means to do that. Like I mentioned earlier, when my parents said that they wanted me to stay longer so I could save and buy. And that's something they wanted and obviously I didn't do that, but I could have done because my parents wanted to be able to help me in that way.”
Andi:
“Well, that sort of leads us to that fact from the Institute of Fiscal Studies that found that parents provide £17 billion to financially support their children, which is a huge, huge number of people and a huge amount of money.”
Lisa:
“But it's just sort of not talked about. And when it comes to the average amount that families are spending on their children buying their first property, it's about 32 and a half thousand pounds, which is no small amount. There are ways that you can help your kids if you want to just without using 32 and a half...”
Andi:
“–thousand pounds yes, which not everyone has.”
Lisa:
“We've come across an article from the Financial Times discussing the quite creative term of inheritocracy, whereby the only way (and this was more centred around London homeowners and First Time Buyers) that people are able to buy are those with inherited wealth.
“In my own perspective, because we all do have different levels in terms of where we are on the home ladder, it does feel like that. A lot of the time, I'll sit down with my friends who haven't moved out and it feels like – like I said before – a bit of a pipe dream? And a very difficult goal to meet. If you don't have that inherited wealth or, like we said earlier, a second home which you can stop people from renting and jump into in London…
“The average first time buyer homes are £450,000, which is crazy. So, the statistic for the earnings that people are getting when they move into London as a First Time Buyer now is at £90,000, roughly. Which is not the average salary that people are on when they would like to move out from their homes or probably exit the renting market.”
Andi:
“Your average wage is what? Around £32,000 in the UK – I think. Or 28 or something like that. We're going to talk more about affordability next time, but from a basic level, you'll get a mortgage for 4.5 times your income, which means for £450,000, you need to be earning £100,000 to even qualify to buy that home.
“That is the other side of it, to be fair. Even with the deposit, you do need to have that affordability in place, unless the deposit is absolutely massive. We're not saying people who get that help aren't holding their own as well, and I'm sure we would all want a little boost if we're so close and we've worked so hard, and our parents could help us. It's just mad that you can buy a flat up north for 80 grand, or 60 grand, or, you know, the same prices that you would have seen years ago. But people want to live where their homes are. They want to live where their families are and their friends, and it's not ridiculous to want that.”
Jez:
"And also where the jobs are as well. I've obviously – I live in London, and I have friends who live, like, up north or down south who pay a lot less than me their average life. But my job’s up here, my friends are up here, and my life is up here.
"There's still a lot of jobs in the capital and in places like Manchester and big cities that are more expensive because that's where the work is. And so, people can't really help where they can get a job, especially in these times right now with cost of living everything. People need a job, and if they can get a job, they can get it where they get it. Sometimes you're pigeonholed into a place to live, and then it's dangerous to try and get a place there.”
Lisa:
“Yeah, absolutely. I mean, there are luckier people, potentially the parents now who bought a home in the 90s in London. It's going to be a lot more expensive than it was when they bought it, but it's not the same for their children, who they might want to live nearby. So, if they are able to help, it's not a bad thing.
“But an interesting way of perceiving this sort of conversation around inequality and inheritocracy for people who are looking to climb that ladder now. There’s a study that was done by the IFS (the same one we were talking about earlier) saying that 18% of the children of renters receive a large financial gift in early adulthood, whilst nearly half (so, 46%) of the children of the university educated higher earning parents received that same substantial gift in the same age bracket as the children of those renters.
“And this doesn't really outright say that there's generational wealth at play here, but it does give you a sort of visual.”
Andi:
“If anything, it's really impressive that 18% of renters have that cash available to give their children and, you know, want them to have it to get on the ladder. Like, is it that there's a push towards that sort of stability of home ownership that they want for their kids? Maybe they haven't gotten help for different reasons. Divorce often results in, you know, selling the family home. And then renting. Or sometimes downsizing or travelling. There are loads of things. People could be renting.”
Jez:
“There are also some places that rent for a lot of money, so you can't really be sure who those renters are. Because some people choose to rent a very expensive place and they have the income to do that and then that could be giving to the numbers as well.”
Andi:
“I am also very shocked by that. A lot of the time, I'm like, ‘why? It's like 6 grand a week to rent this massive mansion.’ Who's renting this? Why?”
Jez:
“Yeah, if you've ever gone down a rabbit hole of looking at expensive properties – those millionaire websites – and be like, this is this is a huge mansion but…it's to rent. Why would you rent this? Just buy it if you have that money!”
Andi:
“The other thing that's quite interesting is that a lot of people have their money tied up in their property. So, they might be asset rich, but cash poor. So, I mean, we're going to talk about the ways that those parents can actually help kids, but it's quite interesting that, you know, having 30 grand available in cash to gift to your kids, especially when that's not really the average deposit anymore… And they may need more, and they may need more when they buy their second home and try and get a bigger property.
“It's quite interesting to see that there's sort of that access to cash. You know, if you want to ask your parents for help and they'll go, ‘okay, yeah, I can give you £500 or two grand or whatever.’ And then you're going actually, ‘I…I need 45 grand...’ It's a very different conversation. There's help, and then there's gifted deposits.”
Jez:
“And that’s the thing. That's the thing, because the conversation’s not even had with the parents. I'm still seeing stories of parents who are helping their kids get on the ladder and then they just now realise how expensive it is to buy than when they did because they bought, like, when it was really cheap. And now and they haven't really kept up with it because they just bought the house and now they've settled and now they're trying to help their kids and realise, ‘oh, it's very expensive now!’”
Lisa:
“Yeah, well, that's a great segue to the average deposit. For a First Time Buyer in the UK, it currently stands at a very nice £61,000. And in London, if you double that and add a couple thousand, we're looking at £116,000. Those people that haven't bought a home in 30 years might argue that kids now should be finding their own success, just like they. It's not that hard. Just…less avocados.”
Andi:
“Oh, oh, the rage!”
Jez:
“We should have a jar for the amount of the avocado in this.”
Andi:
“Just pick a pick a fruit to be annoyed at.”
Jez:
“Or a vegetable.”
Andi:
“It's avocado and iced coffee.
“Yeah, I'm – I'm not going to save 45 or 60 grand’s worth of avocados in in this lifetime. It's also
always in the comments section of anything – whenever anything comes out in the news about deposits or First Time Buyers, there's always someone in the comments going, ‘yeah, you know what? I bought a fixer-upper and I lived in a place with no heating, and I did the floors myself, and I lived in my car and I had no phone…’
“Okay, you want people to be that miserable – like you're here, shouting at people on the Internet... Do you think that worked out well for you?”
Jez:
“I think it's this serious, like, problem I've seen with a lot of older people. It’s like, I didn't have it, so you can't have it either because like this is the whole thing with – I'm going off a tangent about, like, student loans. When they wanted to like cancel student loans in America, people were like, well, I had to pay student loans. So, you should too. It's like, but you were miserable! Like, so, you don’t want someone to have a better choice than you did? But people don't. People want people to suffer the way they did, and so if they had to slave away to buy a home, they want other people to do it too.”
Andi:
“Well, it’s access, right? The stock of property in this country is a lot lower than it was. And I would have loved to have bought a cheap fixer-upper and lived at home and spent four years making it lovely and doing it myself. And that's the dream – everyone thinks they can do that. Most people can't do that because they aren't electricians or, like, have any understanding of anything. But I would have loved to have done that.
“Are there any fixer uppers available? No, because they're bought by investors to turn into rental
properties. The stock available to First Time Buyers is so much lower than it was.”
Jez:
“Yeah, there's a lot of houses being built that aren't affordable as well. There's so many, like, new builds, estates and things, but then you actually look at how much they cost. It's like, okay, so this isn't a First Time Buyer property.
“But they labour under the impression that it is for First Time Buyers, but it's still more expensive than anything they can afford, a lot of the time. So, they're obviously just bought my renters all the time…and the cycle begins anew!”
Lisa:
“So, when we look at that conversation and those people who haven't bought homes in a while, saying those things – so, the average deposit being £61,000 in the UK now – back when they were doing it (if we look at about 30 years ago) the average cost of a home was £60,000 and the average cost of home is now £269,000.”
“So, our deposit now, on average, is the same as the cost of their home – on average, 30 years ago. So, it's not really comparable. I mean, we can look at inflation and things like that and really complicate it, but either way…”
Andi:
“And wages haven't gone up in line with how the property market's gone up. There are so many arguments to defend young people doing their best. And as we've said, you do need to still have a life. People's Gym memberships, going on about gym memberships – ‘don't go to the gym, just go for a run…’ You know what? Gym memberships are really good for people's mental health as well as their physical health. I think young people, or for some buyers, what they can't win.
“They're meant to be living on gruel and the scraps and not living their lives and not enjoying themselves. And they're meant to be struggling because that's how you – that’s how you get something and that shows grit and determination.
“And that's the stories everyone loves: these stories of sacrifice. But they didn't have to do that before, and I think it's okay to be annoyed about that. I think it's important to remember as well that it's more than just the cost of the deposit. We do an assessment, here at reallymoving, every year on the cost of moving. In 2022, it was £14,207. That's for things like conveyancing, surveyors, removals… All the costs that come with moving home or buying a home, but we don't actually remember to save for. So, on top of that 60 grand, you've got all these other costs that allow you to buy that home. You know? Is that something you've got to ask your parents to help with as well?”
Lisa:
“So, what we're going to do now is essentially go into how, if you do have help from your parents or you think you might be able to, if you converse about it with them, how exactly we would go about that conversation and what sort of help you can get from them.”
Andi:
“We've already talked about staying at home. There are loads of other options. So, I think we all really feel strongly that it's fine to get help from your parents and we're going to talk through how you have those conversations if you do think they're able to help you. But also, if you don't have help, it can feel really disheartening and we don't want that. So, there are options for that too.
“I think in the grand scheme of things, we just need to change the way we talk about this, because the only way you hear people talking about it is when they're like, ‘oh, did Mommy and Daddy help you? Oh, it must be so hard to have rich parents’ rather than understandably, your parents want to help you out. They have the means, and mine can't, but I appreciate that.”
Lisa:
“And it is one in two home purchases from under 35 that’s done with parental support.”
Andi:
“Yeah, exactly.”
Lisa:
"So, it is really common. So, I imagine if you if that surprises you, it's because, like we said before, it's just a little awkward to talk about.”
Andi:
“Rip the curtain away and start realising just how normal it is and not to feel rubbish if you are working really hard and not getting closer to building that deposit!
[MUSIC BREAK]
Andi:
“Let's talk about how you go about getting that support from parents. How do you start that conversation when you want to ask about a deposit or what kind of support they can give? Have you guys had this conversation with parents or how would you approach it?”
Jez:
“My brother has bought and he had a little bit of help. So, my mum was the one who started the conversation with me and was like, ‘I want to help you as well because I want to treat both my children equally.’ But then I'm the one saying, ‘well, you know that's a big financial commitment to do twice.’”
Andi:
“Also, I guess parents might have that conversation – like, you know, if you are buying with someone else, they want to know how much they're putting in and how much they can put in and what everyone can afford. Actually then, if you put in different amounts to the deposit, does that mean you own different percentages and it becomes a lot more…not necessarily a legal issue, but it becomes a lot more of a conversation around specifics.”
Jez:
“Yeah. And it just – I think it depends on the fact because some families would – I mean it depends what kind of people. I think there's – there is the worry that some families might be like, ‘well, I put more in. So, like, I've got more of a say on your child's home because you didn't put as much in for your child.’ You know, if you get a difficult family like that.”
Lisa:
“There are things that you need to lay out before you enter into this conversation with your parents. Like Andy said, you've done the research and you at least know a little bit about what you're doing and what you expect, what you want from your home if you want this help.”
Andi:
“And also, should you be a part of your conversation with your partner's parents, do you want to have a say in what they are doing or is it just your partner's responsibility to do that?
“We only had support from my parents, which, to be fair, wasn't the support you normally get for a deposit because we bought shared ownership. So, our deposit was, I think, 6 grand in total. So, we did most of that ourselves. It was a bit of a last-minute decision. So, we had a little bit of top up help.
“So, we're not talking about the huge amounts that a lot of people do get in support. What I think was interesting is that when you do ask for help or when help is offered, you have to explore what the boundaries are there. So, my dad wanted to come and see the property. He had a lot of opinions on what…you know, where it was and was I making the right decisions and what questions I asked and just being a parent which was very good, and, actually, the first property we looked at wasn't a great choice. And he did identify that. So, sometimes it's good to have that help alongside it. But I can see that a lot of parents, especially if maybe they're a little bit anxious about giving away a large sum of money would find issue with properties. Or maybe they want you to stay closer than you would like to move. Or maybe they want you in an area that feels safer to them. I think money does come with strings. And it's an awkward conversation to have when you're kind of asking for a favour, but you also do need to have boundaries.”
Jez:
“If your parents aren't together, there might be contention about which one of them gives more. Or which one of them?”
Andi:
“I know a friend in that situation. Yeah, yeah. Difficult process where you think it might work out well for you and that they would up, you know, one up each other. But that doesn't always…sometimes it's all, ‘they've given you something so, I'm not going to help.’ Or, ‘ohh well, they're involved, so I'm not going to be involved.’”
Lisa:
“I think you just need to chat about what works for you and your family, whatever that may be. So, it might take a while, but just to be patient with what they're capable of. Like, I don't know what my parents’ finances are. One of them is retired, so it's definitely different to what it used to be. I wouldn't presume to know how much they'd be able to help me, whether it be financially or not.
"But like mine don't know exactly what the market's like right now because they haven't had to, explain it to them. Be patient. Make them a cup of tea and just see what they can do. If you think that they would be willing to. But yes, lots of family situations are very different, so I suppose it's all depending.”
Andi:
“I do think it's important to show what you're doing. So, you talk about how much you've saved. Talk about what you're doing to save. Do research on the market so you know how much a property costs. You know, a 10% deposit is average. So, you know what you're saving for.
“It's like a
presentation, right? It's like going into a business meeting or pitching for something you want to show that you are dedicated to, that you've done your research, that you're not just asking on a whim. And especially that you can afford to make the payments, you can afford to pay for the mortgage every month. You can afford to pay for the insurance, for the other things like conveyancing and removals and all the things that come with buying a home as well as keeping it in good condition. And looking after yourself as an adult; we've talked about being infantilised in the buying process, but as long as you can make sure, as an owner, you can own it and be responsible, then I think that makes up for it.”
Jez:
“Yeah, I think the key is not to hedge all your bets on your family, because obviously they will be a massive help, but don't just assume you're going to get a certain amount from your family. Like do the work yourself. See what you can afford the most, and then the family will be, as you said, the top up kind of thing.”
Andi:
“We will be talking about affordability next time. You know, you still have to qualify. You have to have the wage to make them more, you know, to make the mortgage payments. So yeah, that responsibility still sits with you. So yeah, as we say, you're not expecting them to do all the work.”
Jez:
“So, the most popular way of parents helping out with buying a house is a gifted deposit. This is when a parent gifts you the deposit and has made it clear that they have no intention of owning the property. It's completely written down as a gift. Different measures are put in place to make sure that this is made clear when you're buying it.”
Andi:
“It sounds really complicated, but it's actually just one form that you get from your conveyancing solicitor which your parent or whoever's giving you the money will sign to say: I'm giving this freely. I'm not expecting anything in return. And that the motivation is one of is of love and not commercial interest, which I think is quite nice for a for an official form.”
Jez:
“Obviously, the point of this is that, you know, people would try and money launder. But you're not. Your parents aren't criminals. They're just giving you a gift, that’s it. This is just money I'm giving. I don't want to own the property. Well, hopefully.
“There is a rather morbid stipulation. If the parent or whoever's gifting the deposit dies in seven years of giving this deposit (which hopefully they won't, but you never know) you might have to pay inheritance tax. Always be aware of that and it's best, as sad as it is, it's good to plan for those kind of things because life throws curveballs sometimes.”
Lisa:
“So you hand over that letter to the mortgage lender with proof of funds and ID, and that's a gifted deposit! What do you guys think of a gifted deposit as an option?!
Andi:
“I mean, it's the most popular thing that people do. It's probably the one that we talk most about when we talk about the Bank of Mum and Dad. I think what's interesting is that we think of these big lump sums of money, and that's probably when that gifted deposit letter comes in because it's such, you know, it sort of raises some flags, but it's a big lump sum of money.
“It might, however, have been that your parents have been giving you £100 for the last couple of years and letting you build it up that way, which we're going to talk about – what you can do when you are saving long term. So, I don't believe if it's been over a very long period of time and it's actually just your money at this point because you could have spent on anything. I don't believe you have to use the gifted deposit letter for that. But when it's, like, a big transfer out of an account into your account, not long before your purchase, then that's very clearly a gifted deposit. So, it might be that for some families, that works better: small and often over a long period of time. Especially if you're saving. Sometimes it can give you a bit of a boost that you're saving alongside someone else. But it is another option for a way to get support long term, and we're going to talk about my absolute favourite lifetime ISAs and how you're going to get boosts from that monthly saving. So, look forward to that coming up.
“So, should we talk about what happens when you don't have Bank of Mom and Dad but you do have support from them. So, perhaps they haven't got a lump sum to give you. Perhaps, like you said about parents being retired, you know, or just things are expensive now. It's harder to have savings. They may not be able to help you with a deposit. But they can help you in other ways?”
[MUSIC BREAK]
Lisa:
“So, joint mortgages are a really great way of getting that parental support without asking for a lot of cash or a big bank transfer. So, what is it? A joint mortgage is a loan taken out by more than one party where you can combine your incomes. And this will give each payer legal ownership of the home, but not necessarily equal claim. That depends directly on how you and your family wish to split it. All incomes and credit ratings are considered. So, if a contributor’s rating is a bit weaker, this will affect others. So, do keep that in mind.”
Jez:
“One of the advantages of this is obviously that you don't just have your income considered – [but also] your parents’ and your partner’s – whoever you're buying with. And you can borrow more because of that. Because borrowing for a mortgage, your income is taken into account. So, having more income means maybe a better property. Something more ideal. I mean, it's also helpful to split other costs, because buying a home is not just buying a home. There are also other costs that come with it, like stamp duty, legal fees, insurance and stuff. So, everything will be split when you're buying with your parents with a joint mortgage and also you can just get a larger deposit because you can put more money in.”
Andi:
“There are some cons as well. You don't get a First Time Buyer Stamp Duty discount if you are buying with someone who has already owned a home before. So, actually that is the same whether you're buying with a partner who's previously owned a home or parents who do currently or have previously owned the property. So, you won't get the discount on that which is a shame. If your parents already own a home and then buy this one with you, they will pay more in Stamp Duty as it'll be considered a second home. So, that is something – a downside for them.
“You may also find is that you've got less control because your parents got a stake in the property. So, as much as we've heard, you know, ‘my house, my rules,’ growing up. It kind of blurs the lines a little bit. With a joint property, it works for some people. Especially, I think, parents who have owned multiple properties before. Or it even potentially works well if your parents are renting or, you know, maybe they've sold a property and they're happy to rent. If this would then be their sole property, that solves some Stamp Duty issues. But yes, it's an option.
"So, you'd still need a deposit. So, that's the thing. You get higher borrowing power. But as we'll talk about next week, those two things are tied. So, it works quite well as a short term solution to help you get on the ladder. And you know you're not going to stay there very long. Maybe you might move in with a partner in a few years or something like that. It's a good way to get on the ladder. It is still quite a lot of work. In some ways your parents will be helping you apply for the mortgage and buy the property together, but you may be taking on the responsibility of the actual mortgage payments, so they're sort of there as a silent partner, which could work. I mean, you don't have to split all the payments as well. You might not expect them to pay for your conveyancing fees, if it is still meant to be your house that you're living in. But yeah, you definitely get a lot more buying power.”
Lisa:
“I think this works really well for people who have a certain relationship with their parents. So, if you have this joint mortgage and you came to an agreement where you can paint the walls as you wish, get that sofa that you want and things like that, it wouldn't be a problem. But if that's not the situation you're in, maybe this isn’t for you.”
Jez:
“I think another thing to consider with this is going back to what we talked about at the top of this, of, like, the stigma of buying with your parents because this isn't just getting help. This is, like, you are owning with your parents, in a way. You are still living in your parent’s house, but you also own it as well. I think there has to be consideration if you're going to feel, like, infantilised or, like, you're going to feel like this isn't…I don't want people to feel, like, bad for buying with it because people might want to make them feel like they didn't really accomplish anything. Because you're still buying. That's what I'm trying to say. You are still part of it. Don't feel ashamed if this is the best option for you because you're still part of the process. And maybe in the future you will buy a house by yourself. This is just your first one, and if people try to make you feel bad for it...go away.”
Andi:
“Absolutely. That's – that's exactly it. We should put that on T-shirts. Especially if you're paying the mortgage or the majority of the mortgage or things like that. You take ownership where you can.”
Lisa:
“There's also – if you don't want so much involvement from your parents – there is the option of a springboard mortgage. So, it's similar to the joint mortgage, but it does not require any sort of big bank transfer. So, all you need from your parents is their credibility and their willingness to help. Perhaps the best part of the springboard mortgage is that there is no need for a deposit. Parents can instead offer their savings or a chunk of their property equity for mortgage security. The lender will be assured that if you are unable to make a mortgage payment, there is a safety net. So, as long as you and your parents are certain that mortgage repayments are repayable, whether they support you in this or not, these assets should never be at risk.”
Andi:
“What physically happens when you get a springboard mortgage is that you have an account that's attached to your mortgage account that has either your parent’s savings or is just tied to them in their name with an awareness that their house is sort of on the line – that they have assets that are available. And all that means is that the bank is using their assets as your safety net, and you'd still get a warning if you had missed a payment and it would still be on you. But, long term, it just means that they've got someone there to go to if you do default. Property equity is the value that's in a property. So, when you own an asset like a home, you're kind of putting it on the line on a springboard mortgage. So, when people remortgage, they add more debt to their property. So, it's almost like a remortgage to release equity. Your parents are putting their livelihood and their home on the line in this case. So, be an adult about it. Make sure you've done your research. Make sure you know what you can afford and what you can pay. Money and family is hard anyway. It's a hard conversation to have and it comes with strings and it – there's expectations and being grateful and being grateful enough…the last thing you want to do is let your family down when they've helped you out.”
Lisa:
“So, if you can chat about how capable you are to keep up with mortgage payments, for instance, the springboard mortgage might be a really great option. There are different lenders with different versions of springboard mortgages and different names.”
Jez:
“Barclays is the one that's called the springboard mortgage. For that one, they ask for family to deposit 10% of the property price into this account for five years. You then, as a First Time Buyer, choose a 5-year fixed rate. Your parents will be tied to that, or whoever's helping, and they'll earn interest on those savings. But they can't take any money out until it’s released.”
Lisa:
“There's also Halifax and Lloyds, which is a little bit different but quite similar to Barclays. The only difference is that the helper’s savings must be deposited for three years rather than five, and the savings rates might be a little bit higher than Barclays’.”
Andi:
“You've also got Nationwide, which is slightly different. It's called the family deposit mortgage and they have to have a Nationwide mortgage and be able to borrow against it. And they have to be a family member. So, no friends helping out, which is normal, I assume. The bank will lend your parents the money to be donated as a gifted deposit, so it's kind of borrowing against their asset and to create a deposit for you.
“So, most of these do depend on parents having a property to borrow against or the savings to do so. It's a way of them not giving away this cash if they haven't really got it to spare. But they cannot touch it for five years and if they trust you, it's a nice way of using their standing and their, sort of, credit history and all the things that come with being a responsible adult without actually physically giving away a large chunk of money that they may need. You're really just borrowing it, which is a bit nicer.”
Jez:
“I think that's the thing. Obviously, if you can continue to pay the mortgage (which you should be when you're buying a house, you should be secure that you can continue to pay the mortgage) then they never have to really pay anything because they'll get their money back in the end. Sometimes life happens and you end up not having the money you once had, and you default on mortgage payments, then the parents are there as a safety net. But really, they probably won't end up paying.”
Andi:
“And we've said, the deposit is the hardest bit to get hold of, right? It's the hardest thing to do. Saving it takes forever. So, all you're doing really is cutting on that time that you could have been saving – that you will actually be in your property paying it off.”
Lisa:
“The only cons really to this (and this is totally dependent on how much you and your parents have discussed this and they should really only do it if they trust you with a springboard mortgage) [are that] your family savings and or property are on the line. Their savings will not be returned to them until you've paid off any debt, and those funds can also be used to pay the payments that you may have missed. There's also – if savings weren't used as a safety net – there's property equity. If your parents put forward property equity rather than savings, that can be at risk of repossession. If you do not pay the mortgage. So, you have to make sure that you're actually capable of keeping up with these payments.”
Jez:
“I think this is a time where input from family is important because they need to know that you definitely have done your research and know that you can afford to pay back. So, this is somewhere where I don't think you can afford to, like, not let them…not meddle but this is something that's very important for them – to let them assess whether they think you have got it all right. Because they already own a property, probably, in this case. So, they've done it before, so I think they would have knowledge and then you might realise that you've missed something or you don't actually have the ability to pay back and they can tell you, ‘hey, this is not the right option right now.’”
Andi:
“That's why everyone needs to listen to our affordability episode next week! But also say, ‘we've been listening to the Make Your Move podcast and learning all we can about getting ready to go and reading loads of articles on reallymoving and doing cost calculators and figuring out what it is we need to do!’ So, we are here to be the proof that you are ready to buy your home. And if you don't think you’re ready yet, keep listening.”
Lisa:
“The option that we've talked quite extensively about already is staying at home. Staying is something that I do, which I've already mentioned, and it is a fantastic option to save money. The rent reduction is, I mean, if your parents are charging the same as landlords, I'm really sorry. It really makes a difference when you're trying to save.”
Jez:
“Probably my mom undercharged me rent. But I was paying a little bit, but not nearly as much as I pay now.”
Andi:
“Did you have saving in the front of your mind at that point? Had you been paying into an account for a deposit or for savings out of that?”
Jez:
“I have a couple of savings accounts, but it was never really necessarily for buying. But that's always something that – it's like if you're saving, it's something that could go towards. And I just – I have some savings accounts that I've never touched and just kind of left. So, it wasn't necessarily about buying. I think for my parents, it was. My parents were like, ‘you should be saving up to buy a house.’ But I've got savings and those years at home really did help because my brother, straight from Uni, went to renting and then buying and it was financially a lot, and my mum kept saying he should have come home but obviously he wanted to live with his now wife and so it's just a decision everyone has to make.”
Andi:
“That is one of the things, isn't it? If you're in a relationship, that becomes a bit harder. I know some people do it, but that that's an extra line of balancing people’s needs and expectations if you move into your childhood home with your partner. But people do it to save money and, yeah, rent is the biggest expense. It's…you know, and it goes up. It's gone up a lot in the last couple of years, especially the moves that were created through the pandemic; people moving out of London or moving out of cities and brushed back when they were told to stop being remote.”
Lisa:
“The average rent at the moment is 1,184 pounds a month. I’m not sure what it is in London, but I'm imagining that's probably boosting it.”
Andi:
“Yeah, that’s eyewatering. Even as a student, if you've been renting, you're usually sharing with a bigger group of people. You know it's short term. Electricity bills split five ways isn't really going to hit you too hard. So, some people do stay, you know, in their university towns and things like that and make that work for a little bit longer as well, if you can, which is also a nice way to do it.
“I think it's when…we talk about this adulthood thing when living like a student suddenly doesn't sit comfortably anymore, and you can't make do with the noodles and the, you know, shared living spaces and 15 people to a toilet or whatever. It's giving an insight into my living experiences...I will tell you, I lived in Norwich with five people and I paid £230 a month in rent as a student. To live in a beautiful Victorian house – madness!
“Rent is the biggest expense that you're going to face. So, saving that as long as you can gives you a boost so that even if you do decide to start renting, if you need that space, if you need it to keep a good relationship or to move in a new relationship or anything, you've had a bit of a head start. And also, it is easier to save once you can see money in that account. It's easier to add to it than it is to start from scratch.”
Jez:
“If you can live with your parents for a bit longer, you should. Five years was doable for me. Six? Maybe not.”
Andi:
“Do the maths. I think that's probably the easiest thing. Look at a rental property that you would want to live in. Look at the upfront cost. Look at the monthly cost and then look at what you're paying now and ask yourself if you can hold out for another year.”
Lisa:
“And if you're listening to this, it's fair to say that you probably do want to move out and this is the last thing you want to hear, but it should be considered.”
Jez:
“It's good, but obviously some people don't have that relationship with their parents and they need to leave, and that's totally understandable too.”
[MUSIC BREAK]
Jez:
“So our data on really moving has actually shown that first time buyers are more likely now to be buying homes with more than one bedroom, meaning that's going to cost them more. The reason for this is probably because, nowadays, people are buying later in life – their first home. So, a lot of them have families, or they're planning on having families and they need that extra space.”
Lisa:
“It looks pretty gloomy for anyone looking to move out earlier, but if you're not in a situation where the Bank of Mum and Dad can support you, do not worry – whether that be financial or in the other ways that we've spoken about. You'll be happy to hear that there are other ways to get onto the property ladder.”
Andi:
“Before, we used to have the Help to Buy ISA. That has gone, but actually, to be perfectly honest, I thought it was rubbish.”
Lisa:
“Why was it rubbish? Because you've mentioned that before.”
Andi:
“So, it had so many limitations. So, firstly, you could only put in £200 a month. So, actually building up
a big enough amount was quite hard. There was a price limit on the properties that you could buy, which was actually quite low; £250,000 limit across the UK. It just didn't take into account that, you know, regional differencing and pricing. If you were buying in Cambridge where the average property price was way above that limit, you were never going to be able to make use of it. So, you might have been saving and this Help to Buy ISA for years, gone to buy, found that prices had moved beyond it, and then you couldn't use the ISA. Also, they only released the actual money after you'd completed on the property, so [you weren’t] actually able to use the money as a deposit. People were telling stories about buying furniture with it and things. They couldn't actually get the deposit before the sale went through. So, it had a lot of teething problems and I'm glad they got rid of it because the Lifetime ISA does not have those problems.
“I love my Lifetime ISA! It's the best thing. It's free money – it's free money! So, you can pay in up to £4,000 a year. You can do it in one go, you can do it monthly. There is no – you can start from a pound. There's no lower limit of how much you can put in. Anything you've got that you can chuck in there, you can do it as and when. You can set up a direct debit. Whatever you want to do. You get a 25% state bonus, so if you put in four grand, you get £1,000 for free. And that is every year. And you can keep doing that, which I think is really exciting. And so, yeah, even if you put in, you know, a fiver a month, you're still getting something on top of that. It still feels like something that is working towards it.
“So, there are some limitations. You have to be under 40. You have to be over 18. The only downside is that it is locked in there, which can be quite scary if you aren't sure that you're ever going to be able to afford a home. You could technically be locking this money away and then be worried that you can't access it. The only way you're allowed to take money out is if you are buying a property or if you are terminally ill and you need access to the money.”
Jez:
“Or if you are over 60 and still haven't used it. But that would be a long time to wait.”
Andi:
“So, if you do withdraw it, but it's not for a home, you will pay withdrawal tax. You obviously lose the bonus, but you also…I think it is – it does work out as less than you put in. But if you need the money, you need the money. But yeah, I wouldn't. This is for a deposit. That is what it's for. I used mine in my purchase. I still do use mine now and I'm going to use it as, like, a top up for a pension. I don't put in as much as I did when I was saving for deposit, but it's still a useful tool to have, even after you bought a house.
“So, you have to have opened the Lifetime ISA 12 months before withdrawing the money for a deposit. So, if you are planning to buy, open it as soon as possible. I think you can open it with a pound. You can't do it if you're buying a property to rent out. It is for people who are trying to buy homes and it's probably the best tool to help you build your deposit that we have in this country. We know that building a deposit is hard. This is pretty much the only resource we have where you are given money for saving and it that it's in a significant amount that you could save. You can save…you can save up to £33,000. I think it's the total they do – they do cap it, eventually. But as I say, it's free money. A property can't be over £450,000, so I know, again, that does seem there's still a limit, but think about how much higher that is than the Help to Buy ISA with £250,000. £450,000 may not get you much in London, but across the rest of the UK you should be able to find a First Time Buyer home under £450k.”
Lisa:
“It's an amazing scheme and I haven't done it because I didn't know about it until very recently and now I'm going to do it.”
Andi:
“Yeah, the sooner you start the better.”
Lisa:
“I wish I did it sooner. Now I'm annoyed at myself. If you start at 18, you put – if you’re able to put £4,000 in a year, you’ll have £25,000 before your 25th birthday, which is very nice. I think they should tell people this at school!”
Jez:
“There's – there are many things we're going to talk about that they should tell us at school.”
Andi:
“I mean, gosh, even if you put a tenner in a month at 18 because you weren't really thinking about it...So, that's definitely the number one thing you should be doing if you want to buy a house, even if you are getting a gift, a deposit from your parents, or from anyone, because you can put it in there and you can let it work for you and let it make more money.
“We know for most people, if you're listening to this, you probably aren't intending to buy immediately. You probably are saving long-term and we will probably talk about saving down the line. But the time passes anyway, right? So, the sooner you start, the sooner you’re getting free money from the government and that's all I have to say on that.”
Jez:
“So, obviously the LISA (Lifetime ISA) [is] the number one, and we agree that they're the best thing to do and you should definitely take one out, but the other option is shared ownership, and this is where you buy a share of the property, but not the whole thing. So, you're buying half the property and renting the other half. So, it's kind of a hybrid mix between renting and buying for someone who isn't capable of buying the whole thing but doesn't want to just continue to rent forever. So, yeah, it's helpful for people with small incomes who are struggling but still can purchase a little bit of a property.”
Lisa:
“There are some good pros to this. So, you can buy sooner due to the reduced deposit and mortgage price. It's readily available for many new builds, as well as existing properties. But on the flip side, you won't own the land the property is on due to the fact that it will be a leasehold rather than a freehold. And service charges will have to be paid with the home. If and when you want to buy more stake in the property, once you have the financial freedom to do so, there are also legal charges. We'll expand more on shared ownership in the next episode when we talk about affordability, but how do you find it, Andi, as someone who did it?”
Andi:
“Yeah, it was really the only way for me to get on the property ladder. Otherwise, you know, otherwise I would have spent the next 15 years saving for a deposit because I live in Hertfordshire and I wanted a 2 bed because I have a family. So, it was a great option for us. The deposit was very small. We got a lovely new build which, yeah, newbies do come with their own teething problems, but you can also get properties that, you know, were new builds five years ago. So, they're a little more lived in and it's a bit more of a traditional situation.
“I don't think the leasehold issue is an issue because that's what would happen if you were buying a flat anyway. There's nothing different about that. The only thing that's different is you will have a relationship with the local authority or the local housing association, or whoever owns that part of your property. So, it's almost like being a council tenant to an extent. On the upside, you get someone to come out and fix things if things in the general areas are not working the same way as you would if you were a renter. So, if there's damage to a front door or there's something in the hallways or, you know, rubbish isn't being collected properly or something like that…that's the same as being a renter. If your boiler brakes, you're an owner, and that's your responsibility to deal with it. So, you do get a bit of both.
“Honestly, I would have preferred to buy traditionally because my mortgage cost plus my rental cost...it's quite high. It's about the same as my rent was before, but if I'd gotten an additional mortgage, you're looking, like, £600 a month compared to rental of sort of 14. Whereas this is closer to that 14 because you're paying both rent and mortgage. And then obviously if mortgages go up or down, that impacts it as well. So, it's an extra cost to consider. But if you are already renting, like we were, then it actually seemed like a really good deal because it's the equivalent of what you're paying to rent without a huge deposit, and you get to paint and put shelves up and do things to make it your own home.”
Jez:
“And also, you're on the property ladder. And I think the important thing is once you buy a home, it's so much easier to buy another one.”
Andi:
“Yeah, that was it. It's a great first step on the ladder so that you can continue saving. You can continue putting money into your property. I recently learned about, sort of, overpaying on your mortgage and the impact that can have. So, I hope we do an episode on that because it's shocking how much paying an extra £10 a month can save you like a year’s worth of interest on your mortgage. Like, how much a small amount per month is over time.”
Jez:
“I believe…I don't know whether we’ll talk about this one in the next one about shared ownership, but there's…there are, I believe there are some shared ownership properties that you can't staircase all the way.”
Andi:
“Yeah. So, the point of a shared ownership property is that it has to be available to people who wouldn't afford regular purchases. So, if you buy up the whole thing and then you sell the whole thing on, it suddenly is just in the normal market. It's not a shared ownership property anymore.
“I think we should definitely do an episode of staircasing because people are very confused by it. Some people, when they buy a small portion of a shared ownership home, they really do want to own the whole thing and they want it to be theirs. They love it and that also will mean that their rent portion will go down. So, if we own 35%, if we decided to buy an extra 10%, our rent would come down accordingly and our mortgage would go up. But usually, your mortgage would probably be lower than the rent, so it evens out. But bearing in mind when you staircase, you do have to go through the whole buying process again. You have to get a valuation on what the property’s worth, you have to get a conveyancing solicitor and do that whole buying process again for this extra portion.
“But for some people, it's worth it if they're buying a family home or they've sort of bought a portion of a bigger property. You can buy houses on shared ownership. But a lot of people just use it as a stepping-stone, and then it's also easier to sell on later because you've only bought a small portion. So, someone else who was in your position will be able to buy it from you. Whereas if you bought a bigger chunk, it might be harder to find someone who could afford to buy it from you.
“It's got pros and cons. It's probably not the easiest alternative, but as we've said as well, you know, we're going to talk in our third episode with Kate Faulkner, who's a property expert on how to find these kinds of hidden gems on property portals. So, whilst shared ownership is a more affordable option, it may be that, actually, there are cheaper properties that fit the criteria for you or are in slightly different areas. Or there's a few variables and actually there are things that you can afford. And there are things that have a smaller deposit, so you might be able to do it on your own, especially with the help of a Lifetime ISA.”
Lisa:
“Plug! Plug!”
Andi:
“We should get sponsored by someone!”
[MUSIC BREAK]
“So, I think it's been a really successful and interesting end to our first episode. I hope everyone really enjoyed it. You guys, how would you summarise what you think you've got out of today's episode?”
Lisa:
“I think to start early if you're able to. Get a LISA. I will be getting a LISA, and I wish I did before.”
Jez:
“I'd say ignore the haters. Don't let anyone shame you for needing help or going the route that you choose because it's about you at the end of the day what you want that works best for you. So don't let…don't let other people's opinions interrupt the best way for you to go about it.”
Andi:
“And I would say: don't believe every story you read in the media about how everyone's doing it on their own. And don't let yourself live just to buy. You need to also live your life. And if that cup of coffee makes you happy, then be happy.
“We hope you've enjoyed our first episode and you'll stay tuned for the upcoming ones!”
Lisa:
“You've been listening to Make Your Move, the podcast here to make moving simple. We hope you found this episode useful, but as always, everyone's situations are different. So, make sure to do your own research before making your move. Make Your Move is brought to you by reallymoving, the price comparison site for moving home services. If you have any experiences or questions you'd like to share or ask that might be put on a later episode, please email us at
[email protected]. See you in the next episode!”