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Loan options discussed by experts

Anxious parents keen to loan their children money in order to fund the purchase of their first home have received advice from experts at the Daily Mail.

Handing over a 'lump sum' as a gift was termed the "traditional option" by the newspaper.

However, it was suggested that this choice was only open to a fortunate few as "many families do not have access" to the ten per cent deposit generally required by mortgage firms.

With the average first-time buyer paying £168,000 on their property - the lump sum could approach £20,000, including fees and stamp duty.

A parental loan - otherwise known as the "Bank of Mum and Dad" was also explored as an option.

"If you are borrowing a house deposit off parents, or considering lending one to your kids, make sure that the ground rules are laid out clearly," the newspaper advised.

"What interest, if any will be paid? When will the money be paid back? Who is responsible for paying it back and how will this be done?"

A further, lower cost option, was also put forward: that the parent acts as guarantor for their child's property.

This means that they promise to be responsible for repayments if the homeowner falls behind - and represents an attractive solution for many parents who cannot afford to donate or loan money up front.

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