ISSUE 7/05

Are your kids in danger of becoming KIPPERS?

By Leanne Smith

Leanne Smith

By the age of 33 surely most kids should have left home! But have you got a house full of Kippers (Kids In Parents Pocket Eroding Retirement Savings) instead?

The average age of a first time buyer is now 33 (!) and many big kids are finding that they have no option but to continue living with their parents while they save for a deposit to buy their own home.

If like my own parents, and many others across the county, you are still waiting for your sons or daughters to move out, you will understand the frustration being caused by ever increasing property prices. But there is some light at the end of the tunnel.

Mortgage lenders are now coming round to the problems that first time buyers are facing and have launched special deals aimed specifically at first timers. There are also a few other avenues worthy of consideration.

Parental loans

Even with the ready availability of 100% mortgages, many youngsters are still unable to raise sufficient funds to buy their first property. As a result, it is becoming more common for parents to loan or gift money in order to help their children. To do this, many parents are having to remortgage their own properties.

If you are a parent and worried that you may find it hard to extract repayments from your little darlings, there are several ways for you to secure your funds. One is for your child to take out a mortgage with you. A second charge would be put against the property in your favour, which means that it cannot be sold or remortgaged without your consent. But be aware - some mortgage lenders do not permit second charges so this does need to be checked out.

As an alternative you could have a Declaration of Trust drawn up in your favour, which will put a restriction on the title and give you a legal entitlement to a proportion of the proceeds (or a fixed sum of, say, £10,000) on disposal.

Whichever option you choose, it is always a good idea to take proper legal advice before proceeding - don't hesitate to call us if you need our help.

Buying with friends

For those whose parents are not able to assist with the deposit, the option remains of buying with a friend or sibling. The combination of two salaries will obviously help secure a larger mortgage.

Those who decide to go down that route should be very careful to agree terms with their fellow purchasers, e.g. in what proportions and how long the property will be owned and how household expenses are to be split.

The safest option is to hold the property as "tenants in common", as opposed to joint tenants. That way it is easier to agree on the proportions in which the property is to be held. This means that if one person is putting up a larger share of the deposit they can be sure that they will get back a corresponding percentage of the proceeds when the property is sold.

Bear in mind that if the property is mortgaged, each borrower is responsible for the whole of the mortgage, not just their share. If one person chooses to leave, the other parties would still be legally responsible for the whole mortgage. It is clearly vital that all parties agree at the outset what is to happen if someone decides that they want to move out.

If and when this happens, a transfer of equity will have to be effected and stamp duty could be payable again. It is important that consensus is reached on who is to be responsible for paying this, should the situation arise.

So if you are a parent with a twenty (or thirty!) something still living with you don't give up hope - ways and means do exist to help keep those hard-earned retirement funds intact!