How far would you go to help your child get on in the world?

 

Many Broadstairs parents move area to ensure their child gets into the best primary school or fund their university costs. Many of you reading this have even helped your children with the deposit for their first home from savings.

 

However, I have come across many Broadstairs people in their 50’s and 60’s, who have good jobs and incomes, yet don’t have the savings to give to their children to help them buy their first home. It doesn’t help when you consider …

 

 

I am therefore seeing increasing numbers of parents who are willing to re-mortgage their own Broadstairs home or start a new mortgage (when they own their home outright) — to get their children onto the Broadstairs property ladder.

 

So, whilst the Government is trying to turn Britain’s 20 and 30 somethings from ‘Generation Rent’ into ‘Generation Buy’, the Bank of Mum and Dad are mortgaging their retirement to pay for it all. Yet it need not be cost prohibitive borrowing the deposit as you still have access to interest only mortgages.

 

With an interest only mortgage, your monthly mortgage payment covers only the interest on your mortgage, not any of the original capital borrowed. This means your mortgage payments will be lower than on a repayment mortgage, remembering though at the end of the term you will still owe the original amount you borrowed from the mortgage provider.

 

 

Anyway, many Broadstairs homeowners might be worried about having that level of debt in their golden years. However, many plan to pay off the mortgage when they downsize as they get into their 60’s and 70’s.

 

I talk to many Broadstairs homeowners, who are asset rich but cash poor and desire to help their children onto the Broadstairs property ladder. Their attitude is their children will inherit their property when they pass away, so it seems practical to give them that money to work harder for them earlier in their life when they need it to buy their first home.

 

 

A lot is dependent upon your age and financial position. The mortgage companies will see if you have adequate funds for your retirement and emergencies plus leaving enough equity in the property to enable you to downsize in the future. Like all things, you need to take advice from a qualified mortgage arranger.

 

So, that then begs the question, is there enough equity in Broadstairs homes to borrow against?

In the late 1980s and again in the early 2000s, many Brits saw their homes as a cash machine. Numerous homeowners re-mortgaging at the end of their mortgage’s preliminary term (usually after the initial 2, 3 or 5 years), but when doing so increased their mortgage to enable them to buy a nice car or fancy holiday. Yet, by increasing the borrowing, it created negative equity in the early 1990s and stopped many homeowners moving home between 2009 and 2013 because of their lack of equity.

 

Therefore, I have to ask, have we borrowed too much this time round?

 

Looking at Broadstairs and the specific postcode CT10 ...

 

 

Looking at these numbers, one might think we are again over-extending ourselves, yet as regular readers of my blog about the Broadstairs property market will know – I like to drill down and look at all the figures.

 

Initially, I was worried about these stats, until I considered the equity Broadstairs people have amassed over the same 5 years.

 

 

Even though mortgages have increased, Broadstairs homeowner’s equity has risen even more, meaning as we stand today, mortgaged and owned-outright properties, there is …