First-time buyers looking to get their foot on the housing ladder are turning to increasingly complex ways to purchase their first home as rising house prices push the dream of owning a property out of reach for most of those trying to ‘go it alone’.
New research conducted for law firm Simpson Millar finds that first time house purchases today are increasingly complicated affairs, with multiple parties involved in funding the transaction. Gone are the days where young people – on their own or in couples – simply saved for a deposit, obtained a mortgage, and moved in. The research finds nearly half (47.5%) of first time buyers expect to need to deploy three or more additional means of financing their first purchase – including a mix of gifts and loans from parents, grandparents or other relatives, buying with friends or siblings, various government Help to Buy support schemes and shared ownership. The proportion of first time buyers expecting to need to pull in at least two of these additional means of financing rises to 70%.
Yet despite the rising number of people involved in buying a first property, a worryingly high 33% of joint buyers putting down uneven deposits would not put a legal agreement in place to protect their respective contributions in the event of a split. And amongst all joint buyers with uneven deposits, 18% explicitly say they won’t seek a legal agreement for fear of “damaging trust” and placing a strain on relationships. Without such a legal agreement people who, on their own or with family help, have contributed more to the purchase of the property will have no guarantee of getting their fair share if the relationship breaks down.
Lisa Gibbs, Conveyancing Partner at Simpson Millar Solicitors, said: “Buying a first home today can involve a bewildering array of joint-buyers, gifts and loans from parents, other relatives and support from government incentive schemes. This can lead to large imbalances between the contribution of one buyer and their family, and the contribution of another buyer. It isn’t romantic or fun to be the one insisting on legal protection of your financial contribution. But without one, a fair division of assets and the protection of ‘the family silver’ cannot be guaranteed if the property does need to be sold and proceeds divided at a later date – as is so often the case”.
When it comes to the best way to buy a property, it seems the ‘Bank of Mum and Dad’ remains as popular as ever, with 32% of first time buyers expecting to receive a gift from their parents towards their house purchase, and 26% expecting a loan. One in four (24%) will be using money from an inheritance to buy.
There is a surge of popularity for the Government’s array of “help to buy” support schemes, with many first time buyers intending to make use of the Help to Buy Isa (38%), Lifetime Isa (12%), Help to Buy Equity Loans (10%) or the Help to Buy Mortgage Guarantee Scheme (13%).
Lisa Gibbs from Simpson Millar Solicitors added: “Owning bricks and mortar these days is increasingly a luxury that can only be enjoyed by people with a network of supportive relatives and the support of government policies designed to boost home ownership. While this is a heart-warming story in many respects, the potential for equity held in the property to be divided in a way that is unfair on one joint owner and their benevolent families is a real one – and a risk families and their loved ones need to take seriously at the point of purchase, when legal protection by way of declarations of trust can be put in place easily. You wouldn’t sign a £20,000 plus contract for anything else in life without reading the small print. But when it comes to property, emotions can get in the way of common sense.”
(Source: Simpson Millar Solicitors LLP)
