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What is a family springboard mortgage?
Family mortgages are designed to help first-time buyers and home movers alike to borrow up to £500,000 with the help of family or friends.
With a family springboard mortgage, savings from friends or family worth at least 10% of the value of the home you are buying are held in a savings account for five years.
One of the main benefits of a family springboard mortgage is that there are 0% deposit options available, and the family will earn interest on the value of the funds that are held in the bank.
How do family mortgages work?
Rather than contributing a deposit, lenders rely on the funds held in the savings account for security.
The savings must be a minimum of 10% of the value of the house you are buying. For example, to buy a £200,000 house, you will need to commit a minimum of £20,000 to the savings account for five years.
At the end of the five years, the money in the savings account is returned to the contributing friend or family member, with interest on top. This can be as high as 1-2% above Bank of England base rate. After five years of mortgage repayments, there will be enough equity in the house to remortgage onto a standard deal.
How much can I borrow with a family mortgage?
With a family springboard mortgage, you can borrow up to 5.5 times your income with specific lenders. This means that for a £30,000 salary, you could borrow up to £165,000, which will increase if you are combining incomes with someone else.
What are the rates for a family mortgage?
You can expect to pay higher rates with a family mortgage, around 2-4% typically.
The reason for this is that the Loan to Value (LTV) ratio is 100% as there is no deposit being contributed. 100% mortgages are a risk to both the buyer and the mortgage provider, as it is conceivable that you would be in negative equity if the market drops.
Are family mortgages a good idea?
Family mortgages can help you to get onto the property ladder, but there are alternatives. One such option is a guarantor mortgage, whereby a qualifying family or friend guarantees that the mortgage repayments will be met if you default. This provides security to the lender. Read more about guarantor mortgages in our guide.
How can I learn more?
At Teito, our team of experienced advisors search through more than 20,000 deals to find you the perfect mortgage. We have helped many people like you to find the best rates on their family mortgage. If you're ready to get started, complete our simple online form and we promise to make your mortgage journey as stress-free as possible.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
