dothesums blog

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When banks and building societies have been limiting loans to 70% or 75% of the value of a property, young buyers are often resorting to loans from the 'Bank of Mum and Dad'.

This can be in the form of a simple loan and/or by parents acting as guarantors.

There are dangers and risks though, if the house bought is not easily resaleable.  The question will then be, will the responsibility for the loan revert to mum and dad?

Parents have probably lived in the same location for some time, whilst their offspring at the beginning of their careers, may want to move more frequently. This is especially true if they go for their 'dream job', but cannot resell, in which case they may decide to rent in the new location?  This could then pose problems for parents who may be responsible for a loan on an empty property in a place where they would not necessarily live.

For parents and young adults alike check locations carefully.  Do not buy only for value or price, but consider early resaleability?

The selected location may well be not in the smartest or the least favoured places, but somewhere between these two, where there is a known constant turnover of properties.

Check the location and work out the financial sums carefully in order to limit risk.  Check the forecast future values of the property, to limit losses should an early sale be required.