How to talk to parents and family about money, inheritance & mortgage support

Key takeaways

• Only 4 out of 10 adults feel comfortable talking about money, but asking for help to get on the property ladder may be unavoidable as house prices continue to outpace wages
• Approach the conversation with sensitivity and without entitlement; come prepared with numbers, facts, and a clear budget
• Give your parents time to think and be ready to answer questions about why other schemes won't work for you
• Early inheritance may help your parents avoid Inheritance Tax (40% on estates over £325,000) and let them see you benefit from their support
• Consider the seven-year Inheritance Tax rule, sibling expectations, and encourage your parents to seek independent financial advice

Setting the right tone

It's difficult to know how to ask parents for money for a house. Approaching the subject in a sensitive way, without a sense of entitlement, is a good way to start. You should be honest and explain that purchasing a home without family support may not be feasible for you, and ask whether your parents would be open to exploring ways they can help.

Plan ahead

You should demonstrate seriousness by arriving at the meeting with numbers, facts, and a budget for a modestly priced home. 

For example, finding out the average price of a home in your local area, and using a Mortgage Calculator to get a rough estimate of what you could afford, could help you show them the gap between your affordability and the cost of getting on the ladder. 

You could go one step further and see what you could afford with or without family support. If you complete your details online with Tembo, you can see all the ways you could get on the ladder, including through family-assisted options. Get started here.

It may be easier to understand your position by explaining how you've arrived at that budget, showing what savings you can contribute and how much mortgage finance you can raise.

Explaining how the market may have changed since they bought. At Tembo, we are on a mission to get the next generation onto the property ladder. With the average first-time buyer deposit now standing at £42,324 - more than a full year's take-home pay - it's often impossible for renters to accumulate what they need.

But family-assisted mortgages are one of the ways first-time buyers can bridge the gap - and they are more common than you may think - over half of first-time buyers under 35 receive financial help from their parents. 

Give them time to think

If they agree, give them time to think things over. The conversation may have come as a surprise to them. Set a date to meet a week or two later so your parents have time to mull over your request and reflect on their own financial position.

Be prepared to answer questions

From Lifetime ISAs and shared ownership to the various first-time buyer mortgage products available, there's no shortage of schemes designed to help people get on the ladder. Your parents may ask why you can't use any of those instead.

The simplest way to answer their questions may be to show them the difference between how much your monthly payment would be if you put down a 5% deposit versus a larger deposit with their help. Through Tembo, you can show them all the ways you could buy, with or without family support, by entering your details online with us. Our mortgage advisers can also talk you through the differences between rates depending on your deposit.

Weigh up the options

Every way of helping someone get on the ladder comes with its own set of pros and cons, so it's important to weigh them up together. Here are some questions worth considering:

• If they use some of their pension savings, how can that affect their standard of living in retirement?
• If they choose to release money early from an investment, can that trigger a penalty?

If they decide to remortgage their home to release equity, can that stop them from downsizing in the future or using their property wealth to pay for long-term care?

Consider the tax implications

Any money your parents give you, including equity they release from their home, is subject to the Inheritance Tax seven-year rule.

That means if your parents live for longer than seven years after making the gift, the money is exempt from Inheritance Tax. If they die within seven years, it could potentially become taxable. The earlier they gift you the money, the more likely they are to survive the seven years.

Highlight the benefits for your parents

The standard Inheritance Tax rate is 40% and is charged on the portion of your estate above the threshold of £325,000 (or £650,000 for married couples). That means a significant chunk of what your parents have worked to build could end up going to the taxman if they haven't planned ahead.

By gifting an early inheritance, your parents also get to see you benefit from the fruits of their labour.

Think about your siblings

Having brothers and sisters may affect the amount of money your parents can afford to give you. Your parents might feel obliged to make similar gestures to your siblings, which might put them under financial pressure, or reduce the amount of support they can give to you.

One way to get around that is for them to adjust their will to record that you have already received your share, and the remaining assets are to be split between siblings who have yet to receive an inheritance.

Seek impartial financial advice

You should support your parents' decision to seek independent financial advice before determining how best to help. The money parents contribute toward their children's future can have a significant impact on their own financial security. Inviting the financial adviser to the family meeting could provide all parties with an impartial viewpoint.