Waiting on the death of a loved on to get on housing ladder

Posted on Wednesday, October 26, 2016

According to a new survey of millenial ‘wannabe homeowners’ by money.co.uk, 16% of those polled are waiting for the death of a loved one before they take their first step onto the property ladder.

The survey revealed that almost half of those waiting for inheritance are looking towards grandparents for this windfall and a further 41% are banking on the death of mum and dad.

When it comes to the timing of the inheritance, one in ten anticipate they will get it in the next ten years, a further 10% concede they might have to wait between ten and twenty years.

However, this isn’t as mercenary as it sounds. Many millennials feel their financial options are limited with more than half claiming they can barely cover their day to day living costs so saving simply isn’t an option. A further 40% say they just can’t afford to do it on their own so need to get financial help from somewhere.

What’s stopping millennials that want to buy?

• 53% can’t afford to save

• 32% can’t afford the area they want to live in

• 19% are scared of such a big financial decision

• 12% are worried about being rejected by the mortgage provider

• 12% worry about the impact of missed credit card payments on their credit records

• 12% don’t know what to do first

•   9% do not have the discipline to save

•   7% have un Despite the fact this has been around since the early 80s, one in four (24%) haven’t heard of it and just 9% are going to use it.

Help to buy mortgage scheme: Over eight out of ten (84%) millennials are aware of this scheme but just one in three (34%) are planning to use it.

Gifting from parents: Almost two out of three (65%) have heard of this but again, just 11% are planning to use it as a way of -authorised overdraft blemishes on their credit records

•   4% have county court judgments

So why can’t millennials afford to save their own money to get on the property ladder?

Over a third (38%) are waiting to pay off existing debts first. Over a fifth of the ‘romantics’ are waiting until they find love to split the financial burden. For 22%, living for the moment is a priority above and beyond saving to buy a home.

Do millennials know what the options are?

Shared ownership:

funding their first home.

Guarantor mortgages: 57% of millennials are aware that their parents can ‘guarantee’ their mortgage payments for them but just 6% will use this.

Help to buy ISA : One in four wannabe buyers haven’t heard of these - just 38% will use one.

Hannah Maundrell, Editor in Chief money.co.uk comments; “Getting on the property ladder may not be the impossible dream many people think it is. There are a surprising number of schemes that can help those who can’t afford to get a big deposit together, many of which they probably don’t even know about. If parents can afford it, ‘gifting’ money to children or grandchildren can often be a good way to give kids a tax free early inheritance to help with the deposit. Alternatively, parents that are confident in their kids’ financial capability can be a ‘guarantor’ for their mortgage - this might help get them get the deal they need.

The most important thing to do is to work out how much you can scrape together and be prepared to compromise, you might not be able to afford your dream home when you first buy. You don’t need to be super rich, have wealthy parents or an inheritance before you can buy a house. Just be realistic about what you can afford and do your homework.”

Hannah’s top tips to get on the ladder:

1. Budget: Find out exactly how much you’ll need to save in order to buy a property in the area you want to live - this must include all the costs associated with buying, not just the deposit.

2. Don’t assume anything: Lenders are being more creative in the types of mortgages they’re offering first time buyers so don’t assume you won’t get one.

3. Explore all options: Guarantor mortgages are one option if you have parents, relatives or friends willing to be a back up. ‘Lend a hand’ deals where parents or relatives put money in linked savings accounts that only get redeemed if you can’t pay, shared equity, shared ownership and even buying with friends are all worth exploring. Some lenders have even started doing 100% mortgages again.

4. Help to Buy could give you a foot up on the ladder so check it out if you haven’t before. Equally, the Help to Buy ISA and the soon to arrive Lifetime ISA (April 2017) are definitely worth taking advantage of while you’re saving.

5. Buy with Mum and Dad? If your parents are willing to part with some cash you could consider buying together. They could treat it like an investment and you could rent out a room in the property earning up to £7,500 a year tax free to help with mortgage payments.

6. Get advice if your parents are considering remortgaging, releasing equity or drawing out cash from their pension to help you get on the ladder. This could impact their financial health in the future and (god forbid) land you with an inheritance tax bill if they both pass away within seven years of giving you the money.

7. Gifting? Parents and grandparents can give away as much as they like to their kids tax free, but if they die within 7 years their kids could face inheritance tax. Everyone can give away a maximum of £3,000 each year free from any future IHT though. You don’t pay tax (income or otherwise) if parents or grandparents give you money, but if you get benefits it could impact your eligibility.

8. It all comes down to affordability; lenders will want to see you’ll be able to make your repayments on time every month. They’ll ask for at least 3 months’ bank statements so being sensible for a few months before you’re looking at applying is well worth it.

9. Existing debt: Getting rid of big credit card bills or loans can also work in your favour because you’ll have less going out every month, so more money freed up to pay a mortgage.

10. Checking your credit report is an important start: Make sure it’s a true reflection of your financial past as lenders will use it to judge you. If it shows connections with anyone you don’t share accounts with anymore then apply to get these removed

11. If you’ve never had credit before then it’s a good idea to start. Don’t go mad splashing the cash but get a credit building credit card, spend a little every month then pay your bill off in full and on time. Setting up a direct debit is a good way to do this.

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