Bank of Mum & Dad & cash back!!

The Family Building Society and Barclay’s have created niche products for first time buyers and the bank of mum and dad. Both lenders offer highly competitive 95% LTV products. Mortgage rates are more expensive once you exceed 75% LTV. But these lenders have created innovative products to mitigate the cost of lending.

The Family Building Society has developed a product that enables first time buyers and family members to pool their resources together and buy a property. Buyers will need a deposit of at least 5% and family members will be required to provide 20% of the purchase price. The 20% is placed in a saving account with the building society. The 20% deposit enables the lender to offset the cost of lending at the higher LTV.

For example:

Mary, age 31, is looking to purchase a property for £200,000 and has a deposit of £10,000 (5%).

Mary’s parents can contribute 20% (£40,000) towards the purchase price. £40,000 is placed in a saving account with the building society for a period of 10 years. At the end of the term, the money is returned to the parents, provided the buyer has maintained their mortgage payments.

Mary is able to secure a competitively priced 95% LTV product, a 3 year fixed rate at 3.29%* over 30 years.

Monthly cost: £832

I know what some of you are thinking: Mary’s parents are rich; my parents don’t have £40,000!

For parents or family members who desperately want to help their young ones but simply do not have the cash at present, then the lender offers to take a charge on some of the equity in the family member’s own property. Alternatively, they can do a combination of the two options.

Barclays (via Woolwich) offer a similar product, Springboard Mortgage. First time buyers and home movers can obtain a 95% mortgage so long as a family member (Helper) can deposit 10% of the purchase price in a savings account. At the end of three years, they get their money back plus interest, provided mortgage payments have been maintained during the period.

For Example:

Mary, 31 is looking to purchase a property for £200,000 and has a deposit of £10,000 (5%).

Mary’s parents can contribute 10% (£20,000) towards the purchase price.

£20,000 is placed in their Helpful Start account with the lender for a period of three years. At the end of the term, the money is returned to the Helper, provided the buyer has maintained their mortgage payments.

Mary is able to secure a 95% LTV, 3 year fixed rate at 2.99%* over 30 years.

Monthly cost: £801

These products have been developed for bank of mum and dad/family members/helpers who cannot really afford to give an outright gift to their child but desperately want to provide some sort of assistance without giving up their life’s saving and being subjected to poverty in retirement.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.