Family springboard mortgages is one of the many new mortgages constantly being released onto the market by mortgage providers. Given the abundance of assistance offered to first-time buyers, it appears that lenders have reacted to the demand. ‘Family springboard mortgage’ offered by Barclays, for example, has undergone a few adjustments. There are numerous additional lenders who provide family mortgages.
With the assistance of relatives or friends, first-time purchasers and home movers can now obtain a mortgage of up to £500,000. Additionally, you won’t always require a deposit. In situations where you might otherwise struggle, these bargains can help you climb the housing ladder.
Families can also get mortgages from companies like Nationwide and Lloyds Bank. Everything you need to know about family mortgages, including springboard mortgages and comparable offers from other lenders, is covered in this article.
A family springboard mortgage is what?
A family springboard mortgage can be utilised to get a house with family members as collateral. Savings must equal at least 10% of the price of the home you’re buying and must be kept in a savings account for five years.
Homeowners and first-time buyers can apply for this specific mortgage. Although there are various family mortgages available, only Barclays offer the family springboard mortgage.
The availability of 0% deposit choices is the key benefit of a springboard mortgage. Those that assist you are rewarded with interest on their savings, which serves as security for lenders. not to mention aiding you with housing purchases!
Family springboard mortgages – how does everything work?
Money is transferred into a savings account that is connected to your mortgage rather than being given as a deposit gift. If the loan isn’t returned, this gives your mortgage lender security.
Savings must equal a 10% down payment on a house. For instance, the savings account must have a minimum balance of £25,000 if you’re buying a £250,000 home.
The money from the savings account is given back to your helper after five years, even if the duration of your mortgage will be longer than that. In addition, the security is returned plus interest. This may be 1% to 2% higher than the Bank of England base rate.
How much money can I get a springboard mortgage for?
You should have accrued enough money after five years of mortgage payments to refinance to a standard agreement. This is because you would have equity in the property as you would have paid off at least 10% of the mortgage over a five-year period.
Whether you make a combined or single salary of more than £50,000, Barclays will lend you up to 4.49 times your annual income. If your annual salary is under £50,000, you may borrow up to four times that amount.
With a combined income of £60,000, for instance, you and your partner may borrow £269,400 (£60,000 x £4.49 = 269.400).
Given your income of £40,000 multiplied by four, you could borrow £160,000.
What additional family mortgage options exist?
There are a variety of family mortgages available, including family springboard mortgages. You might discover a better deal with a specific lender as a result. Additionally, you might discover that a different mortgage is simply more appropriate for your situation.
Halifax household increases mortgage
The springboard mortgages from Barclays are very similar to family boost mortgages. The primary distinction is that money is kept in a savings account for three years rather than five.
Family members must assist you, although you may have more than one family member on hand. Each helper must also be listed by name on the Halifax savings account.
If your assist doesn’t want to wait five years to get their money back, the family boost mortgage is a better option. The initial duration is three years rather than five, therefore your mortgage payments may be greater as a result.
Repayments are stretched out over a longer period of time with longer mortgage terms. As a result, they might be less expensive month to month.
Family deposit mortgage offered nationwide
Mortgages backed by family deposits are available from Nationwide Building Society.
To qualify for a family deposit mortgage, your helper must already have a mortgage with Nationwide. Additionally, your assistant wouldn’t have to put any money into a savings account. Instead, Nationwide would secure the loan using the home’s equity.
This is highly dangerous because your helper can lose their home if mortgage payments aren’t made. However, your helper won’t have to use any of their savings to assist you, which might be a huge advantage. Additionally, helpers must be family members; they cannot be friends.
Mortgage with Post Office Family Link
Similar to Nationwide’s family deposit mortgages, Post Office Money offers family connection mortgages.
90% of the total property value will be financed by the Post Office for first-time buyers. The equity in your helper’s property would provide the final 10%. You would have five years to pay back the 10%, and the property would need to be mortgage-free. You can pay down the remaining 90% over the course of your mortgage’s term.
Helpers must be family members only, according to the Post Office, not friends. Additionally, you must make £20,000 annually to be eligible for the mortgage.
Obtain a mortgage loan from Lloyds Bank.
A “lend a hand mortgage” is available from Lloyds Bank, and it is quite similar to Halifax’s “family boost” mortgage.
Family members will be required to deposit 10% of the total property worth each year for three years into a savings account. For the first three years, they won’t be allowed to use the money. After three years, your assistant would receive their 10% back plus interest.
Although it’s optional, you can put down a 5% deposit on your own behalf. You won’t require a deposit because lend a hand mortgages can be used for 100% of the property value.
You would be protected from interest rate increases with a fixed-interest rate for three years and would know exactly how much your mortgage would cost.
Rates for family mortgages
Currently, family mortgage rates range from 2% to 4%. The fact that lenders are offering mortgages with 100% loan-to-value is the cause of rates that may be slightly higher than normal.
The risk associated with 100% mortgages affects both you and your lender. This is due to the possibility of falling into negative equity if the market value of your home decreased.
Cashback may be offered by some mortgage lenders as an incentive to borrowers. For instance, the Post Office and Lloyds Bank both provide cash rebates of £500 and £300, respectively. Deal-sweetening offers like these are available, but if you’re serious about getting the best rate, talk to an advisor. We’ll evaluate your circumstances and then research the greatest offer based on your needs.
Options outside family mortgages
You can get on the property ladder with the support of your family in a number of different ways. An example of security for your lender but not in the form of funds is a mortgage with a guarantor.
Instead, much like family mortgages, guarantors provide a personal guarantee for the mortgage. A family mortgage is in fact a kind of guarantor mortgage. The distinction is that security is now given to the lender in the form of a savings account rather than the guarantor themselves.
Applying for a mortgage with a gift deposit is another option. A gifted deposit does not have to be returned once it has been gifted, which is the main distinction between a gifted deposit and a family mortgage. Because they are aware that they will receive their money back in three or five years (depending on the mortgage you choose), helpers may be more willing to consent to a family mortgage as a result.
Advice for families on mortgages
Speak to an expert before making any judgements, whether you’re assisting a buyer or seeking assistance. There are other things to consider, as this article has outlined. We will be able to identify the finest offers for you after we have a better understanding of your circumstances.
Although it may appear that a five-year contract is preferable to a three-year fixed mortgage, this is not necessarily the case. You might prefer making smaller payments over a longer period of time.
Some borrowers seek stability, while others are more interested in speeding through the initial time so their helper may receive their money back.