Written by: Danny Belton - Head of Lending

The Bank of Mum and Dad is a catch-all phrase to cover the concept of family financial support when getting a mortgage. It can be a helpful way to get on the property ladder, but there are options for those who may not have the means, but want to help. 

Keep reading to discover how the Bank of Mum and Dad works, as well as how to ask your family for help with a deposit if you need it

What is the Bank of Mum and Dad?

Essentially, the Bank of Mum and Dad is when parents help their children buy a property,  offering financial support to help them get on the property ladder. 

However, with budgets tightening across the UK, many are getting support from other family members like siblings. So much so that some are now calling this the ‘bank of family.’

Did you know that the Bank of Mum and Dad is one of the UK’s biggest lenders? According to Legal and General, 20231

  • 318,400 house purchases were supported by the Bank of Mum and Dad
  • More than 50% of under 35s had help with buying their home
  • Financial gifts from family totaled £8.1bn

It’s important to note that this money or support is not necessarily a loan, and can be given in a variety of ways.

Different types of financial support from the Bank of Mum and Dad

There are a few different ways that parents can help their children buy a house, and it doesn’t always have to be about giving money. Not everyone is in a position to do so, but there’s still plenty someone could do to help. First, let’s start with financial support. 

Gifted deposits

The main thing about a gifted deposit is that it’s, well, a gift. You don’t need to pay it back. Lenders do tend to prefer this, as it won’t impact your affordability. All you need to do once you have the money is ask your parents to write a letter detailing how much they’ll be gifting, and that the money does not need to be repaid.

Gifts on black background wrapped in black paper and gold ribbons

Loans for a deposit

If your parents would rather loan you the money, and it will need to be paid back, then your adviser will have to take these payments into consideration when working out how much you’ll have to repay in total, including your mortgage and the loan to your family.

Mortgage guarantors

A close relative can act as a guarantor on your mortgage, and doesn’t involve them gifting or loaning you money. In this case, the guarantor’s income is taken into account when working out how much the borrower can afford to borrow. This means that you could borrow more than if you were able to when applying on your own. 

This does mean that if you can’t make your repayments, your guarantor will be expected to pay them on behalf. This means the guarantor must be able to afford all of their own commitments and lifestyle, as well as your mortgage.

How to ask the Bank of Mum and Dad for money

When it comes to broaching the topic of financial support, it’s best to approach the conversation with honesty, respect, and sensitivity. Start by expressing your gratitude for their support and acknowledge that talking about financial matters can be difficult. 

Be sure to clearly outline your goals and the specific help you need. Is it a deposit, a loan, or a guarantor arrangement? Make sure you’re ready to provide details and information about your personal financial situation, including your income, expenses, and savings. This shows that you’re responsible and committed to achieving your homeownership goals. 

Listen to any concerns they may have and be open to their perspective, since they may have ideas or reservations. Make sure that you are approaching the conversation from a place of collaboration, not expectation.

How a mortgage adviser can help

A mortgage adviser is more than a helpful guide if you’re buying a home for the first time. They’re an invaluable resource, since they understand the mortgage market and can assess your finances to help find solutions that work for you. 

If you have questions about the Bank of Mum and Dad, want to explore getting started on your homebuying journey, or just have questions, then we’re here to help!

Important information

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

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