Would you take on more mortgage debt to gift money to your children?
The ‘Bank of Mum and Dad’ gives an average of £9,050 per child when they remortgage, with nearly a tenth of grown-up children receive £20,000 or more.
That’s according to research from comparison site MoneySuperMarket, which found that 15% of parents who take on more mortgage debt give some of the equity released to their children.
A third of them (32%) said they’d rather accumulate debt themselves than create additional money worries for their child. Over a quarter (26%) said their son or daughter needed the money quickly and 22% said their child was already in debt and didn’t want to add to it.
What they spend it on
Over a third (34%) of grown-up children put the money towards a deposit on their own home, while others use it to go travelling (11%), buy a new car (11%), or pay for ‘everyday essentials’ (9%).
Rachel Wait, consumer affairs spokesperson at MoneySuperMarket, said: “Our research found that 15% of parents released equity when they remortgaged to help their children. However, you’ll only be able to do this if your property has gone up in value and you’ll need to be sure you can afford to keep up with your new repayments.
“It’s also important to factor in the costs associated with remortgaging, such as arrangement fees which can be as much as £2,000, as well as legal, admin and valuation fees. Try to be realistic – only release equity to help your children with life events if you can really afford to do so.
“Also keep in mind that because a mortgage takes so long to pay back, remortgaging may not be the right option for everyone – there may be cheaper ways of getting a cash sum. It’s important to look at all options and shop around before making a decision.”