Family Springboard Mortgages

The housing mortgage can be quite volatile, which can make getting a mortgage difficult, especially for first-time buyers.

Oftentimes, the main hurdle to purchasing a home is the deposit requirement. Most lenders require 10% of the property value to be deposited at the bare minimum, which can be quite steep.

If you or a family member can’t pay the required deposit amount, you can circumvent the issue through family springboard mortgages.

These mortgages involve getting financial help from your family to pay the required amount without losses on either side of the deal.

A Family Springboard Mortgage allows first-time home buyers to get a mortgage with a 0% deposit if a family member deposits 10% of the property’s value into a savings account.

So, let’s explore this loan type deeply and find out how a family springboard mortgage can help you purchase a home.

What Are Family Springboard Mortgages?

A Family Springboard Mortgage allows first-time home buyers to get a mortgage with a 0% deposit if a family member deposits 10% of the property’s value into a savings account.

Family springboard mortgages are a subset of guarantor mortgages, where someone other than the borrower guarantees the loan. 

With family springboard mortgages, a family member can assist you financially to get you on the property ladder. This “springboard” is a temporary agreement that acts without binding your family member in the long term while providing you and the lender security.

A family springboard mortgage may also help you secure a better deal, making it a convenient option if you don’t have funds ready to deposit.

How Do Family Springboard Mortgages Work?

Family springboard mortgages allow a family member to offer some of their savings as security for your loan without directly lending you money.

The amount of money the family member must provide equals the deposit amount required for the mortgage. This amount is deposited in a savings account with the lender for a period of three, five or ten years.

During this time, you will continue to make repayments as usual, but your family member cannot add more money to the account.

Once the security period ends, the security amount is given back to the family member in addition to interest, provided you do not default on payments.

And at the end of this period, you will hopefully repaid enough of the mortgage balance not to need any more security amount.

Note that your family member does not gain ownership of the property, so their name is not on the property deeds. You, the borrower, remain its owner since any money provided by the family member is refunded to them.

Who Can Be The Springboard In Such Mortgages?

The “springboard” in such mortgages depends on the lender, as certain banks and building societies have stipulations that specify who can act as the guarantor.

Some banks accept direct blood relatives and close friends as your benefactors, whereas others may only allow a close relative to fulfil this role.

It’s important to remember that certain banks also allow multiple people to act as a guarantor for the mortgage. For each helping member, the lender will require a different savings account.

Thus, you must check the terms thoroughly to determine who can act as the springboard to propel you onto the property ladder.

Getting A Family Springboard Mortgage

If a family springboard mortgage suits your needs, you can consider applying for it.

The process for getting this type of mortgage differs slightly from a standard mortgage.

You may need to take three crucial steps to get a family springboard mortgage: speaking to your benefactor, finding a broker, and then going through the application process.

Let’s examine each step briefly.

Step 1: Discuss The Mortgage With Your Backer

Consult the family member who will act as your backer for this mortgage.

Show them the terms of this loan, what will be required of them and whether they would be willing to help you or not. Additionally, you may want to set expectations according to your current situation and the lender’s requirements to keep them well informed.

Note that a mortgage is a major part of one’s life, and it’s important that your benefactor is as committed to it as you are.

Step 2: Search For A Broker

Getting the right broker to handle mortgage matters can be the difference between a relatively stress-free mortgage process or not, as the case may be. 

A good broker not only ensures that you get the best deal possible but also increases the success of your mortgage application. They will also work hand-in-hand with your benefactor, bringing the best deals and the right lenders to your attention in the process.

Once you’ve found a broker, feel free to ask any questions about the mortgage, their terms of service, and what they offer.

Step 3: Applying For A Family Springboard Mortgage

Now that you have the support of a family member and your backer has found the right lender, it’s time to apply.

At this stage, your broker will have gathered the necessary documents and evidence like personal ID and residential proof, and they can now approach the lender on your behalf in order to apply.

Following the application, the lender may ask questions about your financial circumstances while examining your documentation.

Additionally, your benefactor will have to open a savings account for the deposit money so they will need documents like proof of personal identification.

Once all information has been provided and the lender has everything they need, they can now fully assess your application. 

Once the benefactor’s funds are in place and the mortgage application is approved, you can move into your new home.

Pros And Cons Of Family Springboard Mortgages

The main perk of a family springboard mortgage is that those struggling to get on the property ladder may be able to do so without having to wait to have enough savings to purchase the property without help.

Individuals with expenses that don’t leave much room for savings can use such mortgages to get a foot on the property ladder. 

Additionally, even though your helper acts as security for the property, you remain the sole owner of the house. This simplifies the ownership conundrum, minimising any complications further down the line for both the purchaser and the individual providing the deposit funds. 

Unfortunately, getting a family springboard mortgage has a couple of disadvantages. For one, your benefactor loses access to the deposit amount until the security term ends, effectively locking the fund for the duration.

Moreover, should you not be able to make regular repayments, your benefactor may lose some or all of the deposit amount. 

FAQ

1. Is it possible to get a family springboard mortgage with a poor credit score?

Getting a family springboard mortgage successfully with bad credit depends solely on what kind of credit issues have arisen in the past and the lender’s criteria. More recent credit issues have a greater chance of preventing your application process from being approved.

2. Can multiple people be helpers in a family springboard mortgage?

It largely depends on the lender, as certain lenders can allow up to 12 helpers for a single mortgage. These lenders may require each benefactor to open a separate savings account instead of having them pool their resources into one.

3. Are family springboard mortgages risky?

As with any other mortgage, family springboard mortgages have an element of risk. Typically, the main issues arise when the borrower cannot repay the mortgage and falls into arrears.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.