Family springboard mortgages

Family Springboard Mortgages are an innovative home loan solution designed to help first-time buyers and home movers get on or move up the property ladder with assistance from their families. This unique mortgage type allows family members to contribute to the process without gifting large sums of money outright, providing a springboard for individuals and families who may find the housing market challenging to enter. These mortgages utilise family members’ savings as security, effectively creating a support system that makes homeownership more accessible. As family circumstances and housing market dynamics continue to evolve, Family Springboard Mortgages are becoming increasingly important in the quest for affordable homeownership.

What is a family springboard mortgage?

A Family Springboard Mortgage is a type of home loan product that allows parents or family members to help their children or loved ones to buy a house without having to gift them money outright for a deposit.

This type of mortgage allows families to help each other out, enabling the younger generation to get onto the property ladder while the older generation can support them without losing their savings permanently. The specific terms and conditions can vary depending on the lender, so it’s important to understand the details of any mortgage agreement before proceeding.

How does a family springboard mortgage work?

A Family Springboard Mortgage works by leveraging a family member’s savings, typically a parent or grandparent, to help another family member, usually a first-time homebuyer, secure a mortgage without needing a significant deposit. The family member’s savings act as a guarantee for the mortgage. Here’s a step-by-step breakdown of the process:

Application: The homebuyer applies for a Family Springboard Mortgage with a lender that offers this type of loan. Depending on the specific terms of the mortgage, the buyer may not need to provide any deposit or may need to provide a smaller deposit than would typically be required.

Family Deposit: A family member, often referred to as the ‘helper’, deposits a certain amount of money (often around 10% of the property price) into a savings account that’s linked to the mortgage. This account is typically held with the same lender.

Mortgage Repayments: The homebuyer begins to make regular mortgage repayments. The loan is structured just like a typical mortgage, with the buyer repaying the principal amount of the loan plus interest over a set period.

Savings Locked In: The money deposited by the family member is held in the account as a security for a certain period, typically around 3 to 5 years. During this time, the helper may earn interest on the savings.

Possible Consequences: If the homebuyer defaults on their mortgage repayments, the lender can claim some or all of the money in the linked savings account to cover the missed payments.

Return of Savings: If all mortgage payments are made on time, at the end of the set period (3 to 5 years usually), the money in the savings account, plus any accrued interest, is returned to the helper. The homebuyer then continues to make the remaining mortgage payments independently.

This type of mortgage allows families to help each other out, enabling the younger generation to get onto the property ladder while the older generation can support them without giving their money away permanently. The specifics of Family Springboard Mortgages can vary by lender, so it’s always essential to read and understand all the details of any mortgage agreement before signing.

How to get a family Springboard mortgage

Getting a Family Springboard Mortgage involves a number of steps. It’s important to remember that the specifics can vary from one lender to another, but generally, the process would look something like this:

Research Lenders: Not all lenders offer Family Springboard Mortgages, so you’ll need to research which banks or building societies have this type of mortgage product.

Review the Criteria: Once you’ve identified potential lenders, review their specific eligibility criteria. This can include the buyer’s income, employment status, credit history, and other factors.

Speak with a Mortgage Advisor: Before applying, it can be helpful to speak with a mortgage advisor. They can help you understand the details of the mortgage, answer any questions you may have, and assist you in preparing your application.

Prepare Financial Documents: Both the buyer and the family member acting as the ‘helper’ will need to prepare certain financial documents. This might include proof of income, bank statements, identification, and information about any debts.

Application: The buyer applies for the mortgage. This process will involve a credit check and an assessment of the buyer’s financial situation.

Family Deposit: If the mortgage application is successful, the family member acting as the ‘helper’ will then need to deposit a specified amount into a savings account linked to the mortgage. This is typically around 10% of the property’s purchase price, but the exact amount will depend on the terms of the mortgage.

Property Valuation and Survey: The lender will usually arrange for the property to be valued to ensure it’s worth the purchase price. They may also require a survey to check for any potential issues with the property.

Finalise the Mortgage: If everything goes to plan, the lender will provide a mortgage offer, which sets out the terms and conditions of the loan. If both the buyer and the helper agree to these terms, they will sign the mortgage agreement, and the funds will be released.

Purchase the Property: Once the mortgage has been finalised, the buyer can then proceed with purchasing the property. This will usually involve solicitors handling the property purchase’s legal aspects.

Eligibility criteria

The eligibility criteria for a Family Springboard Mortgage can vary depending on the lender. However, here are some common requirements that many lenders might have:

Age: Both the borrower and the family member acting as the ‘helper’ should be at least 18 years old.

Residency: The borrower usually needs to be a resident in the UK, and the property to be purchased should be in the UK as well.

Income: The borrower needs to have a steady income that’s sufficient to cover the mortgage repayments. This will be assessed during the mortgage application process.

Credit History: The borrower’s credit history will be assessed. Any history of defaults, CCJs, or missed payments could negatively affect the application.

Deposit: Although the family member’s savings act as security, some lenders may still require the borrower to put down a small deposit.

Affordability: Like any mortgage, the lender will assess the borrower’s financial situation to ensure that they can afford the mortgage repayments. This includes an assessment of income versus expenditure and the borrower’s existing debts.

Family Member’s Savings: The family member acting as the ‘helper’ will need to have savings that they can put into a linked account. This is often around 10% of the property’s purchase price.

Property: The property to be purchased often needs to be of a certain standard and may need to be a residential property rather than a buy-to-let property.

First-Time Buyer: Some lenders may require that the borrower is a first-time buyer, although this is not always the case.

How much can I borrow on a springboard mortgage?

The amount you can borrow on a Family Springboard Mortgage will depend on a variety of factors, including your income, your expenditure, your credit rating, and the lender’s specific criteria.

As with standard mortgages, lenders typically offer a loan-to-income ratio that can range from 3 to 4.5 times your annual income, though some lenders may go higher under certain circumstances. So, for example, if your annual income is £50,000, you might be able to borrow between £150,000 and £225,000.

In the case of a Family Springboard Mortgage, the amount might also be influenced by the amount of money your family member is able to deposit into the linked account as security. This is usually around 10% of the property’s purchase price.

However, remember that being able to borrow a certain amount doesn’t necessarily mean you should borrow the maximum amount. It’s important to carefully consider your own financial situation and what you can comfortably afford to repay.

It’s also worth mentioning that, besides income, lenders also look at a variety of other factors to determine how much you can borrow. These may include your credit score, your outgoings, your employment status and stability, your age, and the type of property you’re looking to buy.

What other family mortgage deals are available?

Family mortgages, or intergenerational mortgages, have become increasingly popular as a way to help younger people onto the property ladder. Here are a few different types of family mortgages that are typically available:

Family Deposit Mortgages: Similar to a Family Springboard Mortgage, these allow a family member to use their savings to help secure a mortgage for a relative. However, rather than placing the savings in a linked account, the savings are often used as a deposit for the property. This deposit is usually locked away for a set period of time.

Guarantor Mortgages: In this case, a family member agrees to be responsible for the mortgage payments if the borrower cannot make them. The guarantor is legally obliged to cover the cost of the mortgage if the borrower defaults, so it’s a significant commitment.

Family Offset Mortgages: With this type of mortgage, a family member places their savings into an account linked to the borrower’s mortgage. The savings offset the mortgage balance, reducing the amount of interest the borrower pays. However, the saver often doesn’t earn any interest on their savings during this period.

Joint Mortgages: This is a mortgage taken out by two or more people. They can be particularly useful for relatives who want to buy a property together. All parties are jointly liable for the mortgage.

Gifted Deposit Mortgages: Here, a family member gives a cash gift that is used for the deposit on the property. This gift is usually non-refundable, and the giver must often provide a ‘gifted deposit letter’ stating that the money is a gift and not a loan.

How much deposit do you need?

The deposit required for a Family Springboard Mortgage can vary by lender. However, one of the advantages of this type of mortgage is that it can enable a borrower to purchase a property with a lower deposit than would typically be required, or in some cases, no deposit at all.

This is because a family member, often referred to as the ‘helper’, deposits a sum of money (usually around 10% of the property’s purchase price) into a savings account that’s linked to the mortgage. This acts as security against the mortgage, reducing the lender’s risk.

However, some lenders may still require the borrower to put down a small deposit. It’s also worth noting that a larger deposit can often secure better mortgage rates, so if it’s possible to contribute a higher deposit, it may be worth considering.

Always check with individual lenders for their specific requirements. And remember, the process of buying a home also involves other costs, such as stamp duty, solicitor’s fees, and survey costs, so it’s important to factor these into your budget as well.

Can you get a 100% springboard mortgage?

Yes, it is possible to get a 100% Family Springboard Mortgage from some lenders, meaning you could potentially buy a property without needing to provide a deposit yourself.

In a 100% Family Springboard Mortgage, a family member (usually a parent or grandparent) would deposit a certain percentage of the property’s value (typically around 10%) into a savings account held with the lender. This deposit acts as security for the mortgage, effectively enabling the borrower to take out a mortgage for the full value of the property.

This type of mortgage can be particularly useful for first-time buyers who may struggle to save a large deposit. However, it’s important to remember that taking out a mortgage for the full value of a property does come with risks, such as potentially ending up in negative equity if property prices fall.

Also, bear in mind that the family member’s savings will be locked away for a set period of time (usually around 3 to 5 years), and if the borrower fails to keep up with mortgage repayments, the lender can claim some or all of the money in the savings account to cover the loss.

Which lenders offer springboard mortgages?

There are many well-known lenders offering a version of the Family Springboard Mortgage in the UK under the product name “Family Springboard Mortgage.

Here are some lenders in the UK offer springboard mortgages:

1. 1. HSBC
   2. Halifax
   3. Nationwide
   4. Santander
   5. Precise
   6. Barclays
   7. Natwest
   8. Principality
   9. Kensington

Advantages of the Springboard mortgages

Family Springboard Mortgages offer several advantages for both the borrower and the family member acting as the ‘helper’:

Lower or No Deposit Requirement for the Borrower: One of the biggest challenges for first-time homebuyers is saving up a large enough deposit. With a Family Springboard Mortgage, the borrower may not need to provide a deposit, or they might only need a smaller deposit than usual.

Helping Family Members onto the Property Ladder: This type of mortgage allows parents or other family members to help a loved one buy a home without having to gift them a large sum of money. It’s a way of providing financial assistance without permanently parting with the money.

Potential Interest for the Helper: The helper’s savings are usually placed in a savings account for a set period (often 3-5 years). During this time, the savings may earn interest, although the rate will depend on the specific terms of the mortgage.

Return of Savings: Assuming the borrower keeps up with their mortgage repayments, at the end of the set period, the helper’s savings (and any interest earned) are returned to them. This means the helper is not losing money in the long term, assuming the borrower meets their responsibilities.

Potential for Better Mortgage Rates: Since the lender’s risk is reduced by the helper’s savings acting as security, the borrower might have access to better mortgage rates than they would with a standard high Loan-To-Value (LTV) mortgage.

It’s important to remember, however, that these benefits come with potential risks and responsibilities for both the borrower and the helper. For example, if the borrower cannot keep up with the mortgage repayments, the lender could claim some or all of the helper’s savings. As such, it’s always recommended to seek professional advice before proceeding with this type of mortgage.

Disadvantages of the Springboard mortgages

While Family Springboard Mortgages can offer significant advantages, they also come with certain disadvantages or risks that should be considered:

Risk to the Helper’s Savings: The family member acting as the ‘helper’ risks losing their savings if the borrower is unable to meet the mortgage repayments. The lender can claim some or all of the money in the linked savings account to cover their losses in such a scenario.

Locking Away Savings: The helper’s savings are typically locked away for a set period, often 3 to 5 years. During this time, the helper won’t be able to access their money for any other purposes.

Potential Negative Equity: If the borrower takes out a 100% mortgage and house prices fall, they could end up in a situation of negative equity, where the mortgage is worth more than the property.

Increased Borrowing: Given the opportunity to borrow a larger amount, borrowers might be tempted to take on a bigger debt than they would otherwise. If circumstances change (e.g., job loss, interest rates rise), this could make repayments more challenging.

Impact on Helper’s Credit Score: If the borrower defaults, it might impact the helper’s credit score, particularly if they’re named as a guarantor.

Potential Conflict: Financial matters can cause tension within families. If the borrower fails to meet their repayment obligations, it could lead to disagreements or strain relationships.
It’s crucial to fully understand the potential downsides and to seek professional financial advice before going ahead with a Family Springboard Mortgage or any other mortgage product.

Family mortgage rates

Typical UK mortgage rates could vary anywhere between 1% to 5%, depending on these factors.
However, these rates can change frequently, so it’s crucial to do up-to-date research.

It’s also important to keep in mind that the lowest rate might not always be the best option, as other factors such as fees, the flexibility of the mortgage terms, and the suitability of the mortgage product to your specific circumstances should also be considered.

Alternatives to family mortgages

There are several alternatives to Family Mortgages, especially for first-time homebuyers or those who may struggle to save up a large deposit. These include:

Shared Ownership: This is another UK scheme that lets you buy a share of your home (between 25% and 75%) and pay rent on the rest. Later on, you can buy more shares when you can afford to.

Right to Buy: If you’re a council tenant or housing association tenant, you might be eligible to buy your home at a discount under the Right to Buy or Right to Acquire schemes.

Lifetime ISA: This is a savings account where the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. You can use the savings (and bonus) towards purchasing your first home.

95% Mortgages: After being somewhat scarce, 95% mortgages (where you only need a 5% deposit) are becoming more available again, with some help from a UK government scheme to encourage lenders to offer these products.

Standard Guarantor Mortgages: A family member or friend can guarantee your mortgage, meaning they agree to cover your repayments if you can’t. They don’t have to put up their savings as security, as they do in a Family Springboard Mortgage, but it is still a significant financial commitment.

As always, each of these options has its pros and cons, and the best choice will depend on your personal circumstances. Therefore, it’s important to seek independent financial advice before making any decisions about how to finance a home purchase.

Mortgage advice for families

When it comes to getting a mortgage, whether it’s a traditional mortgage, a Family Springboard Mortgage, or some other family-assisted mortgage, it’s crucial for families to carefully consider their options and seek professional advice. Here are some general pieces of advice:

Understand Your Options: There are many types of mortgages out there, including various types of family-assisted mortgages. Do your research and understand the pros and cons of each one before deciding which is right for you.

Get Independent Advice: Speaking to a financial advisor or mortgage broker can be very helpful. They can explain the options available to you, help you understand the terms and conditions, and guide you towards the mortgage that best fits your needs and circumstances.

Consider Your Financial Situation: Before deciding on a mortgage, it’s important to have a clear understanding of your financial situation, including your income, outgoings, and any outstanding debts. This can help you work out how much you can afford to borrow and repay.

Think Long Term: A mortgage is a long-term commitment. It’s important to consider not just your current financial situation but also any potential changes in the future. Can you still afford the repayments if interest rates rise or if your income drops?

Understand the Risks: All mortgages come with risks. For example, if you’re considering a Family Springboard Mortgage, it’s important to understand that if the borrower can’t make the repayments, the family member’s savings could be at risk.

Protect Yourself: Consider taking out insurance to cover your mortgage repayments in case you’re unable to work due to illness or redundancy. Life insurance can also be a good idea to ensure the mortgage will be paid off in the event of your death.

Maintain Good Communication: If you’re entering into a family-assisted mortgage, it’s important to keep the lines of communication open and make sure everyone understands their responsibilities. This can help avoid misunderstandings and ensure a smooth process.

Are family springboard mortgages good?

Family Springboard Mortgages can be an effective way for people, especially first-time buyers, to get onto the property ladder. They provide a mechanism for parents or other family members to help without necessarily having to give large sums of money directly. However, whether or not they are “good” really depends on individual circumstances. It’s crucial for both the borrower and the helper to fully understand the agreement, the responsibilities involved, and the potential risks. It’s always a good idea to seek independent financial advice when considering such a significant financial commitment.

Can I get a family springboard mortgage with bad credit?

Getting a mortgage with bad credit can be more difficult, but it’s not necessarily impossible. Lenders will review your credit history to assess the risk you pose as a borrower. If you have a bad credit history, lenders might see you as a higher risk and may be less likely to approve your mortgage application, or they might offer you a mortgage with less favourable terms, such as a higher interest rate.

In the case of a Family Springboard Mortgage, while the family member’s savings act as security and can help you access a mortgage without needing a large deposit, the lender will still consider your credit history when deciding whether to approve the application.

What is a family assist mortgage?

A Family Assist Mortgage, also known as a Family Deposit Mortgage, Family Guarantee Mortgage, or Family Offset Mortgage, is a type of mortgage that allows family members to help relatives buy their home without having to directly gift them money.

Different lenders offer Family Assist Mortgages under various names and structures, but generally, they work in one of the following ways:

Using family member’s savings as security: Similar to a Family Springboard Mortgage, a family member (typically parents or grandparents) puts their savings into an account linked to the mortgage. The savings act as security against the mortgage. The lender can claim these savings if the borrower fails to meet their mortgage repayments.

Using family member’s property as security: In this scenario, a charge is placed on the family member’s own property, which can be repossessed if the borrower fails to make repayments. This is often called a Family Guarantee Mortgage.

Offsetting savings against the mortgage: A family member places their savings in an account linked to the mortgage. The savings offset the mortgage balance, reducing the amount of interest the borrower has to pay. The family member can’t access their savings while they’re being used in this way.

It’s essential to understand that while Family Assist Mortgages can help a loved one onto the property ladder, they also involve potential risks for the family members involved. If the borrower fails to meet their repayments, the family member could lose their savings or even their home.

Can I buy my children a house?

Yes, you can buy a house for your children, but there are a few different ways you could do this, each with its own financial and legal implications:

Gift the Funds for a Deposit or Full Purchase: You can give your children the money for a deposit on a house or even buy the property outright for them. However, keep in mind that if you gift them money and you die within seven years, they might have to pay Inheritance Tax on the money, depending on the total value of your estate and the amount you gifted.

Joint Ownership: You could buy a property together with your child, which might make it easier for them to get a mortgage. However, if you already own a property, you could be liable for the additional stamp duty rate, and it could also have implications for Capital Gains Tax if you decide to sell the property later.

Buy-to-Let: You could buy a property and then rent it to your children. However, this might have tax implications, including Income Tax on the rental income and Capital Gains Tax if you sell the property. You’d also be responsible for maintaining the property as a landlord.

Family Mortgage: Some lenders offer mortgage products designed to help family members buy property together, such as Family Springboard Mortgages or Family Offset Mortgages. These allow you to help your children buy a house without necessarily gifting them money.

Setting Up a Trust: In some cases, you might want to consider setting up a trust to buy the property. This can have advantages for Inheritance Tax purposes but can also be complex and requires specialist legal advice.

Buying a property for your children can be a significant financial commitment and can have tax implications, so it’s always a good idea to seek independent financial advice before making any decisions.

Can I use the equity in a family home to get a mortgage?

Yes, you can often use the equity in your family home as a way to get a mortgage. This could be done through a variety of methods:

Remortgaging for a Higher Amount: If you’ve built up a significant amount of equity in your home, you might be able to remortgage for a higher amount and use the extra cash to help buy another property. The extra amount borrowed will be added to your current mortgage, and you will need to make sure you can afford the increased monthly repayments.

Equity Release: This option is typically available to older homeowners. It involves borrowing money against the value of your home while still being able to live in it. This can then be given to family members to help them onto the property ladder.

Secured Loan: This is a loan which is secured against your house. This could be used to raise additional funds but should be considered carefully as if you can’t keep up with the repayments, your home may be at risk.

Guarantor Mortgage: Some lenders offer products where the equity in a family member’s property is used as a security for the mortgage. This is often known as a Family Guarantee Mortgage.

Each of these methods involves a degree of risk, including the potential risk to your own home if repayments are not met. As such, they should not be entered into lightly, and it is highly recommended that you seek independent financial advice before proceeding.

Can you use a springboard mortgage on shared ownership?

It is generally not possible to use a Springboard Mortgage for a Shared Ownership property.
Family Springboard Mortgages and Shared Ownership schemes are distinct and typically cannot be combined. This is largely because the two products have different structures and serve different purposes.

A Family Springboard Mortgage allows a family member to help a buyer get a mortgage by depositing money in a linked account as security, without the need for a large deposit from the buyer.

On the other hand, a Shared Ownership scheme allows a buyer to purchase a share of a property (typically between 25% and 75%) and pay rent on the remaining share, which a housing association owns. Over time, the buyer has the option to purchase more shares in the property.

In both cases, the aim is to help people with limited resources or deposits to get onto the property ladder. But combining them would likely add complexity and risk that most lenders would not be willing to take on.

Can a family share a mortgage?

Yes, families can share a mortgage. There are a number of ways this can be done, and the best option will depend on the specific circumstances of the individuals involved:

Joint Mortgage: This is the most common way for multiple people to share a mortgage. All parties are equally responsible for making the mortgage payments. This could be between a couple, family members, or even friends.

Joint Tenancy or Tenants in Common: In England and Wales, when you get a joint mortgage, you can either be ‘joint tenants’ or ‘tenants in common’. Joint tenants have equal rights to the whole property, while tenants in common each own a specific share of the property.

Guarantor Mortgage: A family member could act as a guarantor for another family member’s mortgage. This means they agree to cover the mortgage payments if the person taking out the mortgage can’t.

Family Offset Mortgages: In these arrangements, a family member’s savings are linked to the mortgage. The savings offset the mortgage amount, reducing the interest charged on it.

Family Springboard Mortgages: This involves a family member putting their savings in a linked account as security for another family member’s mortgage.

While these options can help individuals get onto the property ladder or buy a home that might otherwise be out of their reach, they also involve significant responsibilities and potential risks. It’s important for all parties to fully understand their obligations and to consider the implications if someone cannot meet their repayments.

Is a family deposit mortgage right for me?

Whether a Family Deposit Mortgage is right for you depends on your specific financial situation, your needs, and your long-term plans. Here are some considerations to keep in mind:

Pros:

Helps First-Time Buyers: If you’re a first-time homebuyer and are struggling to save for a deposit, a Family Deposit Mortgage can help you get onto the property ladder.

Utilises Family Resources: If your family members have savings they’re willing to use to help you but don’t want to give away a large sum of money, this can be a good option.

Potential Access to Better Mortgage Deals: The added security of a family member’s savings may allow you to access better mortgage rates.

Cons:

Risk to Family Member’s Savings: The biggest risk of a Family Deposit Mortgage is to the family member who provides the savings. If you fail to keep up with your mortgage repayments, their savings could be at risk.

Locking Away Savings: In many of these arrangements, the family member’s savings are locked away for a set period of time, often several years. They need to be sure they won’t need access to these funds during that time.

Potential Impact on Credit Score: If you miss mortgage repayments, it could negatively affect your credit score.

Potential for Family Conflict: Money can cause tension in family relationships. It’s important to have clear and open discussions about the arrangement and the potential risks involved.

Finding a specialist family mortgage broker

Finding a specialist family mortgage broker requires a bit of research, but here are some guidances on how to find a specialist family mortgage broker:

Online Search: Use search engines like Google to find mortgage brokers who specialise in family mortgages. Search terms like “family mortgage broker”, “specialist family mortgage advisor”, or “family mortgage consultant” may be useful.

Financial Websites: Websites that provide financial advice and reviews, such as MoneySavingExpert or Which?, might have directories of mortgage brokers or recommended providers.

Professional Bodies: Check the websites of professional bodies, such as the National Association of Estate Agents (NAEA) or the Association of Mortgage Intermediaries (AMI) in the UK. They might have a ‘find an advisor’ feature.

Local Financial Advisors: Contact local financial advisors or estate agents to see if they can recommend a specialist broker.

Banks and Building Societies: Some banks or building societies might offer specialist family mortgage advice, or they could recommend a broker.