Bank of Mum and Dad – Cross Charging

Many parents want to help their children buy a home.

Not all of them want to give away savings to do it.

For some, the challenge is not a lack of wealth, but where that wealth sits. It may be tied up in property rather than accessible cash.

This is where another option sometimes comes into play.

Using property as security.

Often referred to as cross charging or family collateral, this approach allows parents to support a child’s mortgage without needing to release or gift funds upfront.

What Is Cross Charging?

In simple terms, part of the parents’ property is used as additional security for the child’s mortgage.

The lender takes a legal charge over both properties.

This reduces the lender’s risk and can allow:

• Lower deposit requirements
• Improved affordability
• Access to better mortgage terms

The key distinction is this:

No cash changes hands.

The support comes from equity, not savings.

How It Typically Works\

While structures vary between lenders, the general approach is:

• The child purchases a property with a smaller deposit
• The lender takes an additional charge over the parents’ home
• The combined security reduces the overall loan-to-value (LTV) risk
• Once the child’s mortgage reaches a set LTV, the additional charge can be removed

From a client’s perspective, this can feel like unlocking value from an existing asset without selling or refinancing it.

The Key Considerations

As with most Bank of Mum & Dad strategies, the detail matters.

1. Ownership vs Risk

Parents remain the legal owners of their home.

However, it becomes linked to the child’s mortgage.

If the child fails to maintain repayments, the lender has recourse to both properties.

This is the most important consideration.

2. No Immediate Tax Advantage

As no money is gifted, there is typically no inheritance tax (IHT) benefit.

For clients where estate planning is a priority, alternative strategies may need to be explored.

3. Property-Based Exposure

Unlike savings based support, this approach introduces risk against a core asset.

For many clients, their home is their largest and most important asset.

Using it as security requires careful thought.

4. Lender Criteria and Complexity

The market for cross charge arrangements is limited.

That means:

• Fewer lenders to choose from
• Specific underwriting requirements
• Additional legal work and costs
• Clear exit strategies required

Understanding how each lender structures these cases is critical.

5. Exit Strategy Matters

These arrangements are usually designed to be temporary.

The additional charge is often removed once:

• The child’s mortgage reduces to a certain LTV
• Property values increase
• Or a remortgage takes place

Clarity on how and when this happens is key to managing risk.

Where This Fits in Holistic Planning

Cross charging sits alongside other Bank of Mum & Dad options such as:

• Gifting deposits
• Linked savings arrangements
• Family loans

Each approach has different implications for:

• Risk
• Liquidity
• Tax planning
• Estate planning

No single solution is universally better.

It depends entirely on the client’s wider financial position and objectives.

When Might This Be Suitable?

This type of arrangement may be appropriate where:

• Parents have significant property equity but limited liquid assets
• There is a clear and realistic exit strategy
• The risks are fully understood and accepted
• Other planning priorities (such as estate structuring) are not compromised

It is less suitable where protecting the family home is the overriding concern, or where gifting or structured lending may achieve a better overall outcome.

Final Thoughts

Helping a family is rarely a simple financial decision.

Using property as security can be a powerful tool, but it introduces a different type of risk compared to using savings.

These are not just mortgage decisions.

They are planning decisions.

If clients are considering this route, a joined-up conversation across mortgage advice, tax planning and wider financial strategy is essential to ensure the right outcome.

Important Information

Your home may be repossessed if you do not keep up repayments on your mortgage.

We do not advise on tax or investments. For this type of advice, please refer to a suitably authorised and regulated adviser.

Symmonds de Lacey is a trading name of Easy Street Financial Services Limited which is authorised and regulated by the Financial Conduct Authority.

Information correct at time of writing – April 2026.