Vida Homeloans has launched its ‘Helping Hand’ product to assist parents in getting their children onto the housing ladder without being on the title deeds and jointly owning the property.
This means parents do not need to pay a stamp duty surcharge and the child can still take advantage of a stamp duty abolishment for first-time buyers (FTBs) purchasing homes priced up to £300,000.
The move means that Vida Homeloans is the first specialist lender growing in the joint borrower sole proprietor (JBSP) market sector.
Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, said: “At a time when FTBs are facing significant affordability constraints and house prices continue to rise, we think that Vida’s Helping Hand mortgage will provide a new and interesting option for mortgage intermediaries who want to provide solutions to parents trying to help their children onto the housing ladder.
"It combines the advantages of a JBSP mortgage with our specialist approach to customers who may not fit the criteria currently demanded by high street lenders.”
Vida’s Helping Hand is available up to a maximum of 90 per cent LTV for FTBs. It can be combined with gifted deposits, the self-employed and has a maximum of four applicants buying together.
Parents will be jointly and individually liable for the mortgage along with the occupiers, such as their child and any partner, in maintaining the repayments.
As part of its range of solutions designed for the FTB market, Vida’s Helping Hand allows parents to help their child by allowing them to be a joint party to the mortgage and have their income taken into account as part of the affordability assessment.
A JBSP can also provide an easy exit strategy when the child’s income increases and they can afford the loan in their own right.
This comes after the latest research by Legal & General revealed that the Bank of Mum and Dad continues to be a top ten UK mortgage lender and is set to lend £5.7bn in 2018 to children buying property in the UK.
In April 2016, a 3 per cent stamp duty surcharge was introduced for people purchasing second homes and buy-to-let (BTL) properties.
Vida Homeloans argued that this presented a significant challenge to parents wanting to help their children get on to the property ladder by jointly borrowing a mortgage and buying a property.
However, the main attraction of a JBSP mortgage is that parents are not named on the title deeds so will not need to pay the stamp duty surcharge.
Additionally, in November 2017, stamp duty was abolished for FTBs purchasing homes priced up to £300,000, or the first £300,000 of a £500,000 property in more expensive locations.
In this case, a FTB purchasing with someone who is not a FTB, such as a parent, would not miss out on this tax break if they purchased using a JBSP mortgage.
Martin Stewart, director at London Money, said: “This is a great initiative, as is any initiative which helps FTBs and that gets the property cycle back to one resembling some sort of normality.
“A counter argument, however, is that if we need to keep hammering a spare peg in a round hole we may be better to take a step back and stop hammering altogether. The scheme seems to actively promote the feature that no additional SDLT is charged. I would like to know how many of the parents that use this scheme to help their children actually have a BTL themselves thereby becoming part of the problem that they are attempting to be a solution for .
“Have we only just realised that the BTL bandwagon has skewed the housing cycle so much that we now need to create false security in order to get young people owning homes ?
“While the initiative is welcome we need stronger , firmer and more advanced thinking in order to support FTBs even more. Scientists say that man won’t survive without bees and I’d argue the same fate awaits property without there being FTBs in hand.”
