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Guarantee: yes or no?
Checking out all other options before parental involvement.
Having a house of their own is an important life goal for many young couples. But there are two major hurdles, namely meeting the requirement to provide some funds of their own and ensuring long-term affordability, so parents often get involved. In order to ensure fairness within the family, it is worth checking out all the young couple's options before any parental involvement.
Making full use of any own funds available.
Generally speaking, a 20% deposit is required when buying property. Half of this (10%) must come from the borrowers’ readily available own funds. These can include account and credit balances, credits available under pillar 3a/3b pension arrangements, an advance on an inheritance or a gift. For the other half, drawings or pledges can also be made, and often are, with money from pension funds. Less common, but possible, is the pledging of other assets such as share portfolios or works of art, if your son has any. This will involve making a security agreement with the mortgage provider. However, the requirements and valuation criteria can vary depending on the institution and asset type. A custody account to be pledged must generally be held with the same bank that is issuing the mortgage. So your son would be tied to the provider.
Interest-free loan as a possible alternative.
If you have enough liquid funds to give all your children an advance on their inheritance or make them a gift, this could provide a solution where nobody is disadvantaged. If too little capital is available to be fair to all the heirs, you may want to think about an interest-free loan to your son. The crucial point here is that many banks will only count such a loan towards the deposit if there is no obligation to repay it. But from a legal perspective, this would then be a gift. If you give your son an interest-free loan with an obligation to repay it, it is questionable whether you will find a mortgage provider who will accept this towards the deposit. The advantage would be how it would have no impact on the other heirs, as the loan would be bequeathed as a receivable, and your son would have to repay it to the community of heirs. Check out the various options and contact several mortgage providers or an independent mortgage broker to find the best solution for your son, as well as your other children, in such cases.
