One in six parents who remortgage use it as an opportunity to provide financial support to their children, according to research by comparison site MoneySuperMarket.
Parents who remortgage to give money to their children hand over an average of £9,050, with nearly one in ten giving over £20,000. A third of grown-up children (34%) put the money towards a deposit on a property.
Nearly one in three parents (32%) said they’d rather take on more debt themselves rather than their children having money worries.
Benefits of remortgaging to help children
Remortgaging to release capital may enable parents to provide their children with invaluable financial support, especially if they don’t have any savings to gift.
Help from the Bank of Mum and Dad is often the only way many people can afford to buy their own home.
Research by credit reference agency Experian found that the amount first-time buyers are saving for a deposit has risen by 12% over the past year to reach an average of £30,989, an often-impossible sum for those on low incomes who are renting.
What to watch out for
Remortgaging to provide your children with financial support shouldn’t be entered into lightly. You must be certain you can cope with higher monthly mortgage payments, even if your circumstances change in future.
Bear in mind too that the more you need to borrow, the higher the mortgage rates you’re likely to be offered due to the smaller proportion of equity in your home.
The amount of money you might be able to raise by remortgaging could also be restricted by your property value and how much your lender is prepared to let you borrow. Lenders will look closely at the reasons why you want to raise capital, with some limiting borrowing to 75% of the property value, whilst others will let you borrow up to 90%.
A good starting point is to talk to your existing lender to see if they can help. You should also shop around to make sure you’re getting the best possible deal. If you don’t have any early repayment charges on your existing mortgage, you might be able to switch to a cheaper rate at the same time, helping to mitigate the cost of borrowing more.
If you’re not sure which lenders to turn to, it’s a good idea to speak to a broker who’ll be able to advise which of them may allow you to raise the amount you need, and what the costs of switching will be.
Remember that whether you stay with your existing lender or move to a new lender, you’ll still need to be assessed for affordability.
Bank of Mum and Dad remortgage to help children