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Five Things You Should Know About… the Bank of Mum and Dad

By Luke Pummell, direct sales manager, Newbury Building Society

1. Definition

The Bank of Mum and Dad, or Bomad for short, is normally used in the context of a property purchase. It essentially involves a housebuyer’s parent or guardian helping out financially with mortgage deposits or applications.

2. Gifted deposit

This is the first of three forms Bomad can take. A gifted deposit is when a family member gives cash to help with their child’s or grandchild’s property purchase. Around 56 per cent of parents chose to do this in 2017.

3. Borrowing on the family home

The equity release route is another facet of Bomad. Provided the parent or grandparent owns their home, equity can be released from their property by raising a mortgage. Parents can unlock cash to gift their children or grandchildren a deposit.

4. Joint mortgage – sole ownership

This is the final form Bomad can take. Parents can help their children borrow more by standing as joint borrower. This can increase the size of the mortgage on offer. The parent would be jointly named on the mortgage but the child would own the property. This means stamp duty on a second home is not payable.

5. Grandma and Grandad

It’s not just down to Mum and Dad any more. Santander recently found that nearly one in 10 (8 per cent) of first-buyers now turn to their grandma and grandad for financial support towards a deposit. This is up from 2 per cent five years ago. Grandparents are rapidly becoming more prominent in the mortgage arena.


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