Side Hustles and the Bank of Mum and Dad: How First-Time Buyers Are Getting on the Ladder

What the survey found

• 64% of first-time buyers said they had relied on extra income, such as online reselling or freelance work, to build their savings
• 26% said they relied on a gifted deposit from family
• The driver is familiar: property prices remain high compared with average wages, so saving a deposit from a single salary can take years

It is a picture of a generation working hard to get on the ladder, often with two jobs and with parents helping where they can. The good news is that both routes can work. The catch is that lenders have clear rules about how they treat this money, and getting it wrong can delay or derail an application.

Making your side hustle count

Extra income does two jobs. It helps you save the deposit faster, and in the right circumstances it can increase how much a lender will let you borrow. Whether it does the second depends on how it is earned and recorded.

• Declare it. Lenders can only use income that has been declared to HMRC. Tax rules for side hustles explained – HMRC Guide
• Build a track record. Most lenders want to see a history before they rely on self-employed or second-job income. Some will accept one year, others want two, and many will average the figures.
• Keep the paperwork. Tax calculations, tax year overviews, invoices and business bank statements all help a lender understand the income. The tidier the records, the smoother the application.
• Let the savings show. Lenders and solicitors must check where your deposit has come from. Regular transfers into a savings account are easy to evidence; large unexplained cash deposits are not.

Lenders vary widely here. One may ignore a side hustle entirely while another counts it in full, so it pays to know which is which before you apply.

Getting family help right

A gifted deposit from parents or grandparents is one of the most common ways first-time buyers bridge the gap, and almost every mainstream lender accepts one. There are a few things to get right.

• It must be a gift, not a loan. The person giving the money will usually sign a letter confirming it does not need to be repaid and that they will have no interest in the property. If the money is really a loan, the lender needs to know, because repayments affect your affordability.
• Expect checks on the giver. Your solicitor will need ID and proof of where the funds came from, as part of anti-money laundering rules. Having this ready avoids last-minute delays.
• Not every lender treats gifts the same. Most are comfortable with close family. Gifts from friends, or from someone overseas, can narrow your options.
• Think about the bigger picture. Large gifts can have inheritance tax implications for the person giving them. It is worth them taking advice, particularly where significant sums are involved.

What a lender will usually want to see

Other help on the table

Side hustles and family gifts can also sit alongside government support. Mortgage Strategy’s report highlights two current options:

• Your First Home scheme. Newly announced and aimed at eligible new-build homes, with a 2.5% cash deposit supported by a government-backed 20% equity loan.
• Lifetime ISA. Eligible first-time buyers under 40 get a 25% government bonus on up to £4,000 saved each year, so up to £1,000 a year, with a £450,000 property price limit and penalties for withdrawals that do not qualify.

Each scheme has its own rules, and not every lender accepts every combination. Working out which pieces fit together is where good advice earns its keep.