Homebuyers can now purchase a new home with no deposit thanks to a new mortgage product launched by a leading building society, but they will still require their parents help.
The latest mutual company to offer what’s known as a ‘family assistance mortgage’ is Market Harborough Building Society. This mortgage enables homebuyers to borrow 100% of the property’s value, including for new homes. One important condition is that the parents of the homebuyer agree to a second mortgage being taken out on a property they already own.
Specifically aimed at first-time buyers as well as those moving home, the loan value overall cannot go over 75% of the value of the parents property. While no deposit is required, the scheme is generally only available to those potential homebuyers whose parents have a lot of equity on their present home or some other property they own.
The mortgage deal, compared to the building society’s standard variable rate currently at 3.99%, gives a 1.5% discount. There is an arrangement fee of 0.5% as long as the minimum payment is £1,250, early repayment charges of 3% are applicable in the first three years and the deal is only available through mortgage brokers.
A spokeswoman from Market Harborough Building Society said it hoped the scheme would be a way for parents to help their children get on the property ladder without needing a significant cash amount for the deposit. Yet, this mutual is by no means the first lender to offer this kind of ‘family assistance’ mortgage.
Many lenders now allow parents to assist their children get onto the property ladder
Although standard 100% mortgages aren’t common, there are a number of mortgage deals now available which allow prospective homebuyers to buy their first home without needing a deposit. Numerous lenders now offer these schemes that permit parents to help with the property purchase so long as they give up equity on their own home. Barclays is one such example. Its Family Springboard Mortgage gives homebuyers a 100% loan if the homebuyer’s family provide 10% of the property value as security, which is then held with the bank. As long as the new homebuyer keeps up the repayments, the parents get their deposit back, plus interest, after three years.
Barclays is one such example. Its Family Springboard Mortgage gives homebuyers a 100% loan if the homebuyer’s family provide 10% of the property value as security, which is then held with the bank. As long as the new homebuyer keeps up the repayments, the parents get their deposit back, plus interest, after three years.
Some smaller lenders now offer similar schemes that give a 100% mortgage. As reported by the Daily Mail, Aldermore Bank, Bath Building Society, Family Building Society, Kent Reliance as well as the Tipton and Coseley Building Society all have similar schemes that offer family mortgages.
Mortgage expert Rob Killeen, says: “It’s regional building societies that are taking the lead with these innovative mortgages which support first-time buyers and the Market Harborough scheme is just the latest of many intergenerational mortgage products now available.
“Using parents equity rather than parental savings or investments is welcome in a mortgage market that more than ever requires assistance from parents.”