Buckinghamshire Building Society has launched a Family Assist Mortgage for first-time buyers (FTBs) who are finding it difficult to raise a deposit.
Customers can borrow up to 100 per cent of the purchase price, with parents or grandparents providing the additional security using the equity in their property.
Under the terms of the agreement, parents or grandparents must have a minimum remaining equity of £130,000 on their property. The maximum loan to value (LTV) is based on the number of bedrooms in their house.
In April the Post Office launched a similar mortgage offering to help FTBs get a mortgage, without paying a deposit. With its Family Link Mortgage offering, FTBs take out a 90 per cent LTV mortgage from the Post Office and then raise the other 10 per cent as a mortgage secured against a close relative’s home.
Buyers then make two separate repayments for the first five years; one towards the assister’s mortgage, which is interest free, and one towards their own mortgage.
Provider view:
Tim Vigeon, head of lending for Buckinghamshire, said: “We have always been keen to support the bank of mum and dad to help their children onto the property ladder. We already accept family gifts and family loans backed with a second charge to help FTBs raise the necessary deposit on their home.”
Mr Vigeon said the deal demonstrates a commitment to product innovation. He added that all the applications are individually underwritten by a specialist team.
Adviser fee:
Product fee £850.
Adviser view:
David Hollingworth, associate director, communications at L&C Mortgages, said: “Buckinghamshire isn’t the first lender to offer an option to FTBs without a deposit but it is an area that can only benefit from more providers and the increase in choice and awareness that it brings.
“One of the key difficulties for FTBs trying to get onto the first rung of the ladder is the raising of a big deposit, a by-product of high house prices. The availability of higher LTV mortgages to 95 per cent has improved substantially and that has held firm after the withdrawal of the Help to Buy Mortgage Guarantee. However, parental and family help continues to play a big part for many aspiring FTBs.
“Products like this recognise that and look to offer an option for borrowers that can afford to take on the mortgage and have limited or no deposit funds.
“Equally it helps parents who do want to assist their child in the buying process but simply do not have large lump sums of cash that they can afford to gift.”
Verdict:
Those that have benefited from growth in their property value may have spare equity and they can use that to help support their child.
Of course it is crucial that all parties understand the ramifications of the arrangement, but there is a growing number of products that enlist the help of parents.
