Helping you to secure your home and mortgage
Saving a deposit for your first home isn’t always easy, so you may think that buying a home without a deposit sounds unrealistic, but a Family Springboard Mortgage could make it possible.
It is currently estimated that over a third of first-time buyers in England are now turning to family for financial aid when it comes to buying a home.
Finding enough money for the deposit is typically the biggest barrier for those trying to get on the property ladder. A Family Springboard Mortgage offered by some lenders allows family members to help each other get on the property ladder.
What is a Family Springboard Mortgage?
A Family Springboard Mortgage allows homebuyers to borrow up to £500,000, with no deposit, if they have a relative willing to act as a guarantor.
How does a Family Springboard Mortgage work?
The buyer can borrow 100% of the property value and will make fixed monthly repayments.
The guarantor will need to provide the equivalent of 10% of the property value in cash savings and will not be able to withdraw the funds until the fixed term, typically 3-5 years, has been completed.
What happens after fixed term has passed?
At the end of the fixed term, if the buyer has made all the required repayments, the guarantor will have their savings returned, with interest.
The buyer will now have equity, or a share of the property value, based on how much they have repaid. They will then be able to apply for a remortgage, this time borrowing less than 100% of the property value.
What happens if the buyer doesn’t make their repayments?
If, after fixed term, the buyer has missed some of their repayments, the guarantor’s savings will be held in their savings account until all repayments are up to date.
These savings are at risk if the buyer is unable to make their repayments. The property could be repossessed and sold to clear the loan, and the guarantor’s savings would be used to make up any shortfall in the sale price.
What are the advantages of a Family Springboard Mortgage?
For the buyer, a Family Springboard Mortgage is one way to overcome the biggest barrier to buying a home, saving a large enough deposit.
For the guarantor, it is a way to help someone they love to buy a property, without permanently sacrificing savings that they might need later in life. They can also earn interest on their savings in the process.
What are the disadvantages of a Family Springboard Mortgage?
To borrow 100% of the property value, the buyer will usually need to commit to repayments at a higher interest rate than if they were to borrow less.
The guarantor is taking on some responsibility for the repayments and is ultimately at risk of losing their savings. They may also earn less interest (or capital gains) than they could earn by investing their savings elsewhere.
Who can act as a guarantor?
Usually, it is a member of the buyer’s family, such as a parent or guardian. If a family friend is willing to lock away their savings for the fixed period or longer, this may also be possible.
How common are Family Springboard Mortgages?
Family Springboard Mortgages are currently only available from a small number of mortgage providers. Some other mortgage providers offer similar guarantor mortgages.
All Rights Reserved. Information contained in this article and on our website does not constitute advice and is provided for information purposes only. Recipients should not act upon it, but should seek professional advice relevant to their own situation.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.