Posted on 10 January 2013 by
The launch of Barclay’s new “Family Springboard” mortgage has once again brought that stalwart financial institution the “Bank of Mum & Dad” into the spotlight. Typically when aiding their offspring in buying their own home, parents would gift their child a sum of money to be used as a deposit. But the Springboard and other mortgages provide options that do not require the cash to be used as a direct deposit, rather just to be in an account for a certain period of time.
The new Barclays product offers this and is similar to a number of schemes already available, most notably the Lloyds Banking Group’s ‘Lend a Hand’ mortgage – interestingly the savings commitment on the “Family Springboard” is lower at only 10% of the mortgage balance (Lloyds is 20%), and the rate of 1.50% over Barclays Bank Rate is pretty keen too.
Naturally Barclay’s offering will get the attention; however there are other schemes available for those First Time Buyers and Home Movers whose parents would like to assist them, without having to louse the cash as a deposit, which are definitely worth a look.
Chief amongst those are the Marsden’s ‘Family Offset’, who with 20% of the proposed mortgage balance placed into one of their offset savings accounts, will then lend 100% of the purchase price at a variable discounted rate of 3.29%. As with some of the other family assisted products, access to the funds is restricted until the loan to value has reached 75%.
Newbury’s ‘Family Offset’ is also a 3 Year Discounted rate (current pay rate 3.95%), and is available upto 95% with 20% of the mortgage value to be lodged in one of the society’s offset savings account. No access to the funds is allowed until the Loan To Value reaches 75%, and as with the Marsden, no interest is paid on the savings balance but the balance in the account is deducted from the mortgage interest charged.
The Bath Building society, offers a “Parental Assistance Mortgage Scheme”, which is available on a range of their products and again is upto 95% LTV. This scheme requires a charge to taken over the parents property for loans above 80%. Similar to this is Aldermore Bank’s offering, called the ‘Family Guarantee Mortgage’. This will enable the purchase mortgage to be taken out upto 100%. This is a guarantor scheme which also requires a charge to be taken out on the parents property.
A word of caution, because of the nature of these products it is usually a requirement that the family member (s) take full independent legal advice to ensure that they fully understand the nature of the commitment they are entering into.
Finally, for those who don’t have access to the aforementioned family banks, there are standard 95% LTV mortgages. However despite the Bank Of England’s Funding For Lending Scheme having been around a good few months now, these are still very thin on the ground. That said, there is one product that’s struck an innovative note, and is aimed at those who have already moved out and are currently renting. The scheme is for those potential borrowers who have been renting 12 months or more , and who would like to buy a property, but don’t have access to family assistance or a large deposit. The lender will offer upto a maximum of 95%LTV to a maximum loan of £500,000 on a fixed rate basis, which unusually doesn’t have any Early Redemption Penalties at all.
As with most of the building society schemes, there is a credit check but not a credit score, which also means that an individual case can be judged on its overall merits.
As you will see, this is a pretty complicated area of the market and it is important to speak to a broker and make sure that the scheme you pick is completely right for your circumstances.
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