Family Springboard Mortgages
The mortgage market has seen a positive shift towards the introduction and improvement of family springboard mortgages. There is now more help for first-time buyers, and it is possible to get onto the property ladder without an actual cash deposit.
This article will outline everything you will need to know about family springboard mortgages. For the most up to date information make an online enquiry or call us 0300 124 5655 . We will put you in the contact with the best broker for your situation.
There are also a variety of different similar schemes available, your mortgage advisor will be best place to recommend the most suitable product for your needs.
What are family springboard mortgages?
This is a specific product that allows family and friends to help you purchase a property with the help of using savings kept in an account with the lender. Deposits are kept in an account, normally for 5 years and the minimum amount is 10% of the property value.
The mortgage is available to homeowners and first-time buyers. Below is a breakdown of the basics.
You own the property
Use your family or friend’s savings to purchase your own home and they will get their money back with interest. You must make all mortgage payments for this to happen. Any missed payments will be deducted from the savings account.
You don’t need a deposit
You can borrow the full purchase price of your property because the person helping you out has provided the deposit as security. If you have your own deposit this can also be used.
The maximum you can take the term over is 35 years; this could make the mortgage more affordable for you by keeping the monthly repayments lower.
How does a family springboard mortgage work?
This is alternative to gifting a deposit. In essence you are using a loan from family/friends as the deposit which is paid back with interest after 5 years. You will have made repayments on the mortgage during the 5 years, reducing the balance and allowing you to remortgage and use the equity as your own deposit.
If you have missed any payments and your account is in arrears, any outstanding monies will be deducted from loan.
A major advantage of the springboard mortgage is allowing someone with no deposit to get onto the property ladder. The benefit for family/friends is being able to help and get their monies back with interest.
How much deposit would we need?
You can get the mortgage without putting in any deposit yourself. You will need a minimum of 10% of the property price from family/friends in the savings account as security.
Below is an illustration on how the deposit works.
How much can I borrow for a springboard mortgage
Normally this is between 4 x and 5.5 times your income. Any credit commitments will also be considered and will affect affordability. There are a fewer lenders who look at these type of mortgages and this can sometimes limit borrowing potential.
The type of income you receive will also affect how much you can borrow.
The lender will want to see your latest 3 months pay slips and confirmation of any additional income such as bonuses and commissions. P60’s could also be requested to show continuity for certain bonuses.
If you are self-employed your income will be assessed on the profits and earning from the business. The most common way lenders assess income is via tax calculation’s and tax year overviews
Before you start your property search, speak to one of our mortgage experts who will be able to run through all the details with you and give you potential borrowing amounts.
It is always advisable to get an updated copy of your credit report before starting your property search. You cant do this by clicking here
How long do I need to have been self-employed?
Most lender will want you to be able to evidence 2 years of self-employed earnings. There are a few lenders who will want 3 years trading history.
To read all about self-employed mortgages and how income is calculated click here.
What are the alternatives to springboard mortgages?
There are other ways family members can help you get onto the property ladder. One way is a guarantor mortgage. The family member would provide security via a charge on their property. These can be useful if you fail on affordability with the lender.
The main difference is instead of the security being in the form of savings, it’s a charge on a property used a s security. There are normally extra costs involved in this type of mortgage, such as valuation fees on the security property.
Most families decide that a gifted deposit is the easiest option. This is when a family member or friend gifts the deposit money to you instead of a loan. You can read all about gifted deposit mortgages by clicking here.
Legal advice for springboard mortgages
The person who is helping with the deposit for a springboard mortgage will need to have independent legal advice. This cannot be from the same solicitor who is controlling the purchase. All fees for this will need to be covered independently.
The reason for the independent legal advice is to ensure that the person putting the money into the saving accounts fully understands the implications and processes involved.
If the lender needs to repossess the property, the money in the saving accounts can be used to cover all shortfalls.
Any funds in the account will not be accessible until the tie in period for the agreement has ended.
Speak to a first-time buyer mortgage expert
Being a first-time buyer can often seem daunting, the advisors we work with will explain the process from start to finish.
Our first-time buyer, family springboard mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
The expert brokers we work with have experience in dealing with all aspects of unencumbered remortgages, and importantly using the whole of the market to access the best deals available.