Lending to the Bank of Mum and Dad – Case Study

It’s been reported that 25% of all property transactions now have an element of parental funding, which collectively makes them the UK’s ninth largest lender. At Positive Lending, we’re experiencing a rising trend of new enquiries for these ‘Mum and Dad’ borrowers looking to raise funds to support their offspring in many different ways.

The challenge

Last week, we received just such an enquiry from an intermediary who was struggling to find a suitable finance solution for his clients. The borrowers, a couple in their late 50s, wanted to raise £70,000 to support their adult children’s business venture.

Having considered both a remortgage and a further advance, the broker had drawn a blank with the client’s first charge lending options. The broker had also considered a second charge mortgage but had been quoted a high arrangement fee by an alternative packager.

The couple’s children, who were in their twenties, had a relatively new business but they were making good headway in establishing their fledgling brand and carving a niche for themselves. In order to further grow their business and obtain market share, they wanted to invest in the business and purchase new specialist printing machinery. The parents wanted to support their children but did not have adequate savings to do so.

The second charge solution

Positive Lending conducted an enquiry review to assess the loan options available.  Although the couple’s total required borrowing was below 50% LTV, their first charge mortgage lender were unable to help with a further advance due to their age. A remortgage was discounted as they wanted to retain their first charge mortgage preferential rate.

The best loan outcome was the market-leading second charge product with a 15 year term.  The broker was pleased with the outcome due to our transparent £995 flat packager fee (having been quoted £3500 by another packager) and that he was able to retain 100% of the procuration fee, worth £1,400.

The loan was arranged within 6 weeks and the bank of Mum and Dad were able to fund their children’s business purchases.