Guaranteeing A Home For Your Kids

If you're a parent who's been wondering how to push your adult child out of the nest, here's one way of doing it.

Being a first-time-buyer doesn't seem to be much fun these days. I get the odd email from 20 and 30-somethings who complain that the older generation has supposedly been so 'greedy' with buying/selling/making a profit on their homes that the youngsters have been excluded from the housing market.

I refuse to accept the blame for current house prices though. When I first climbed on to the property ladder 23 years ago, I stretched myself to the limit of my finances. I had lodgers to help pay the mortgage - a situation that lasted for 11 years! I don't think that I should feel guilty for reaping the rewards of the considerable risk I took at the time. Besides, I don't feel smug, I feel thankful.

Nevertheless, I do feel for the 20 and 30-somethings who are struggling to buy their own homes in today's world. For some, their parents will be able to step in to help with a cash deposit but for many this is not an option. Some parents may not have enough in the bank to come up with a sum of money that they can freely give away without going short themselves in the future.

However, if you're a parent of children in their 20s and 30s, you may be earning enough to help in another way. There are mortgages these days that enable you to act as a guarantor for your adult child's mortgage although you'll need a specialist broker who can find such a deal for you. It can be for the entire mortgage as a whole or for the surplus mortgage that your child couldn't afford to qualify for themselves on their current salary.

In the latter instance, the guarantee lasts until the borrower is earning enough to cover the whole loan at which point you, as the guarantor, are released. To my mind, this is the type of guarantee that you can give without putting yourselves at excessive risk regarding your own retirement plans.

So, if you're not in a position to help your child with a lump sum as a deposit, nor able or willing to guarantee their mortgage as a whole, you may be prepared to back up part of it. The important thing to establish is that your child can afford all of the actual repayments and that they won't let you down by failing to do so.

Compare mortgages here at the Fool.