Family Springboard Mortgage or Family Deposit Mortgage

Here’s how a Family Springboard Mortgage typically works: 

1. Family Support Can Help with Deposit 

• A family member, often a parent, offers financial support, but instead of gifting money directly to the buyer, they deposit a sum of money into a special savings account linked to the mortgage. This sum is usually around 10% of the purchase price 
• The money in this account serves as security for the mortgage. If the homebuyer keeps up with the mortgage payments, the family member’s funds are not used 
• Sometimes, instead of a sum of money, a family member can use the equity in their own property as security. In this scenario, the lender puts a no interest charge on the family member’s property for a certain period of time 
• If the buyer has a small amount of savings they’d like to also contribute as a deposit, in addition to the security from the family member, they are often able to do this 

2. There’s a Fixed Interest Period for Savings and No Interest Payments for Equity 

• When savings are used, the family member’s funds are typically held in the account for a fixed period, often around 3 - 5 years. During this time, the money earns interest at a set rate 
• When equity is used, the charge on the family member’s property is interest free; the family member doesn’t pay any interest towards the charge. The charge is simply on the family member’s property until enough equity has been build up by the first-time buyer, again this is typically 3 – 5 years 

3. Return of Funds or Equity 

• If all mortgage payments are made on time, the funds in the savings account, plus any interest accrued, are returned to the family member after the fixed period ends 
• Similarly, if all mortgage payments are made on time, the charge is removed from the family member’s property 

4. There are Risk Factors to Consider 

• If the buyer fails to make the mortgage payments, the lender can keep some or all of the money in the savings account to cover any shortfalls or losses, it can also repossess the family member’s property if equity has been used as security 
• In some cases, the family member’s funds might be tied up for longer than the initial period if there are payment issues 

5. There Are Great Benefits to the Buyer 

• A Family Springboard Mortgage allows the buyer to purchase a home with a lower or no initial deposit 
• This product can offer more competitive mortgage terms because the risk to the lender is reduced by the additional security 

6. Mortgage Terms Are Pretty Standard 

• The terms and conditions of a Family Springboard Mortgage can vary by lender, but generally, the mortgage will have a term like any other traditional mortgage (e.g. 25 years) 
• The interest rates can be competitive because the risk is mitigated by the family member’s contribution 

7. There Are Considerations for Family Members 

• Family members need to be sure they won’t need access to the money they provide as security for the duration of the fixed term 
• They should also be aware of the risks involved, including the possibility of losing some or all of the money if the mortgage payments are not made 

The amount you can borrow on a springboard mortgage will generally depend on your income. With a Barclays family springboard mortgage, you can borrow up to five and a half times your income if you earn over £50,000. If your income is under £50,000, you can expect to borrow up to four times your earnings.

For example, if you earn £40,000 a year, you might be able to borrow up to £160,000. The lender will also consider the source of your income and what other financial commitments you have. Many mortgage lenders use a family springboard mortgage calculator to determine how much to lend to a mortgage applicant. Our easy-to-use borrowing calculator will help you work out what size mortgage you might be able to get.

Barclays offer the Family Springboard Mortgage – that’s their name for their specific version of this product. Other, but not all, lenders offer similar family assisted type schemes under different names, so it’s important to shop around or consult with a UK mortgage advisor such as John Charcol to find out which banks or building societies provide them. 

Many buyers decide a family springboard mortgage deposit is right for them if they need family financial assistance to get approved for a mortgage. But there are additional benefits to taking out this type of mortgage.

Fixed-Term Rates

While it will vary according to each lender, most family mortgages are available on a three-year or five-year fixed term. This provides a degree of stability during the first few years after buying the property. You can then choose to switch the rate, and the remaining loan will be paid over the rest of the mortgage term.

Opportunity for a Better Deal

A springboard mortgage typically allows borrowers to purchase at a better rate than a traditional 95% deal, as the risk to the lender is essentially 90% of the property value.

Property Security

When you take out a family mortgage, you hold full rights to the property. The person putting money into a savings account for you is not a guarantor, which also means they're not liable for Stamp Duty.

Help with Gifting Cash

For parents, a springboard mortgage deposit means they can help their children get on the property ladder without parting with their funds long-term.

Savings Earn Interest

When parents help out their children through a Family Deposit Mortgage, they can also benefit by earning interest. Springboard mortgage interest rates from lenders are typically higher than the Bank of England base rate.

It's a great idea to discuss what type of mortgage is right for your circumstances with a mortgage adviser. John Charcol is here to make the mortgage process as painless as possible for you. To find out more about family deposit mortgages, or other options available to help first-time buyers, get in touch with us today on 0808 250 8400 or submit an online enquiry.