Buying a home in the UK can be tough these days.
With house prices going up and living costs getting higher, saving enough money for a regular mortgage deposit is really hard for a lot of people.
That’s where family deposit mortgages come in as a helpful option.
They’re getting more popular because they make it easier for people, especially if they’re buying their first home or struggling to keep up with their current home costs.
In a family deposit mortgage, family members like parents or grandparents can help out. They can give a hand in a special way that makes it easier to get a mortgage.
In this guide, we’re going to talk about what family deposit mortgages are, how they work, and why they might be a good choice for some people looking to buy a home.
What is a family deposit mortgage?
A family deposit mortgage is a special kind of mortgage that makes it easier to buy a house if you can’t save a lot of money for a deposit.
Normally, when you buy a house, you need to have a big chunk of money saved up.
But with a family deposit mortgage, your family can use their savings to help you out.
Here’s how it works:
Instead of you saving all the deposit money, someone in your family like your mum, dad, or even your grandparents can help.
They can either put some of their savings into a special account with the bank that’s giving you the mortgage, or they can use the value of their own house as a kind of promise to the bank that you’re good for the money.
This kind of mortgage is really helpful for people buying their first home or for those who are finding it hard to move to a new house because of the deposit.
It’s not just for first-time buyers.
If you already own a home but want to move and are finding it tough to save up again for a deposit, this could be a great option.
Who is a family deposit mortgage for?
It’s a great option for quite a few people.
First off, if you’re buying a house for the first time and finding it hard to save up enough for a deposit, this mortgage can be a big help. It’s tough to save a lot of money these days, and this mortgage makes it a bit easier.
But it’s not just for first-time buyers.
Maybe you already own a home but want to move to a new one. If you’re finding it hard to get together the money for a deposit on the new place, a family deposit mortgage can be useful for you too.
Whether it’s your first time buying, or you’re moving to a new place, a family deposit mortgage can be a good option to think about.
How it works
Now, let’s talk about how a family deposit mortgage actually works. It’s pretty interesting because it’s different from a normal mortgage.
First, a family member, like your parents or grandparents, helps you out.
They can do this in two ways.
One way is by putting some of their savings into a special bank account with the mortgage company. This account is linked to your mortgage.
The other way is by using their own house as extra security for your mortgage. This means they tell the bank that if something goes wrong and you can’t pay the mortgage, the bank can use a part of their house’s value to pay the mortgage back.
Here’s the cool part:
Your family doesn’t just give their money away.
If you keep up with all your mortgage payments, after a certain time (usually about 5 years), they get their savings back, sometimes with a bit of extra money in the form of interest.
If they used their house as backup, it means their house is free and clear again after this time, as long as you’ve been paying your mortgage on time.
This setup makes it easier for you to get a mortgage, especially if you can’t afford a big deposit on your own. It’s a way for your family to help you out without losing their savings or the value in their house forever.
Deposits
When we talk about deposit requirements for a family deposit mortgage, we’re looking at how much money your family needs to help out with.
Usually, in a regular mortgage, you need to save a lot of money to put down as a deposit. This can be a big amount, like 5-10% or more of the house’s total price.
But with a family deposit mortgage, it’s a bit different.
Your family can help by putting down some of their savings. This amount often needs to be about 10% of the home’s price. So, if you’re buying a house that costs £400,000, your family would need to put £40,000 into a special account or use their house as security for this amount.
You will find more useful information in our Guide to Mortgage Deposits
The good thing is, this deposit from your family doesn’t have to be given away for good.
It’s like they’re lending it to help you out. After some years, if all goes well with your mortgage payments, this money can go back to them.
This makes it easier for you to get a mortgage without having a deposit saved up yourself, and it’s not so risky for your family since they could get their money back.
How Much Can You Borrow?
The amount you could borrow depends on a few things like how much you earn and the rules of the bank you’re getting the mortgage from.
Usually, the amount you can borrow is linked to your income. For example, a bank might let you borrow up to four or five times what you earn in a year.
So, if you earn £30,000 a year, you might be able to borrow between £120,000 and £150,000. But remember, each bank has its own rules, and they also look at other stuff like your credit history and your regular expenses.
The big help with a family deposit mortgage is that your family’s support can make the bank more willing to lend you money, especially if you don’t have a traditional deposit saved up. The bank sees the help from your family as a safety net, which can make them feel more comfortable lending you more money than they might have otherwise.
But it’s really important to only borrow what you can afford to pay back. Just because you might be able to borrow a lot, doesn’t mean you should. You need to think about your monthly payments and make sure you’re comfortable with them for the long run.
You might find our How much can I borrow mortgage calculator useful
Which Family Members Can Help
One of the big questions about family deposit mortgages is, “Who in my family can help me out?“
This is an important part to understand.
Generally, it’s your close family members who can help you with this kind of mortgage. This usually means your parents or grandparents.
But some banks might let other family members help too, like your brothers, sisters, aunts, or uncles.
In some cases, even close family friends might be able to help. Each bank has its own rules about who they count as close enough to help with your mortgage.
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100% Mortgages
Let’s talk about 100% mortgages in relation to family deposit mortgages.
You might have heard this term and wondered what it means. Basically, a 100% mortgage is when you borrow the entire cost of the house you’re buying, which means you don’t put down any deposit yourself.
Now, with a family deposit mortgage, getting a 100% mortgage can be possible, but it’s not very common.
Most of the time, these mortgages still require some sort of deposit from you.
Remember how we talked about family members helping out with a part of the deposit? Well, because of their help, you might not need to put in any of your own money as a deposit. This is what makes it kind of like a 100% mortgage.
However, it’s important to know that these kinds of deals aren’t offered by every bank, and they might have specific conditions. For example, the bank might need your family to put a larger amount of their savings into the special account or use more of their property’s value as a backup.
So, while it’s a bit like a 100% mortgage, it’s not exactly the same. It’s more about your family helping bridge the gap so you can borrow more money than you might have been able to on your own.
Pros and Cons
When thinking about a family deposit mortgage, it’s really helpful to look at the good points and the not-so-good points. Let’s break them down:
Pros
Less Pressure to Save a Big Deposit: With your family’s help, you don’t need to save as much money for a deposit. This can make getting into your new home faster and less stressful.
Better Mortgage Rates: Sometimes, having a bigger deposit (thanks to your family’s help) can mean you get a better interest rate on your mortgage.
Help for First-time Buyers: If you’re buying your first home, this can be a great way to get onto the property ladder when saving up seems impossible.
Cons
Risk for Your Family: Your family’s savings or their house are at risk if you can’t keep up with mortgage payments. If things go wrong, they might lose their money or have issues with their own home.
Relationship Strain: Money can sometimes make things tricky in families. If there are problems with the mortgage, it could strain your relationship with the family member who helped you.
Limited Choices: Not all banks offer family deposit mortgages, and those that do might have different rules and rates. This means you might not have as many choices compared to regular mortgages.
Is a family deposit mortgage right for you?
Deciding if a family deposit mortgage is the right choice for you involves several considerations.
First, take a good look at your financial situation. It’s not just about being able to get the mortgage; you need to be sure you can afford the monthly payments over the long term.
Then, there’s your family’s situation to think about.
It’s essential to have open conversations with your family members who are considering helping you. They need to be comfortable with the idea of using their savings or home as security and understand all the risks involved.
Also, consider your future plans. If you’re likely to move jobs or cities, this could affect your ability to keep up with the mortgage payments. It’s about balancing the risks and benefits. Think about whether the advantages of getting into a home sooner outweigh the potential risks for both you and your family.
Lastly, getting advice from a mortgage broker is a wise step.
They can give you a clearer picture of whether a family deposit mortgage suits your situation and might suggest other options that you haven’t considered.
How to Apply
Applying for a family deposit mortgage is a bit different from applying for a regular mortgage.
The first step is to have a good chat with your family. It’s important that everyone understands what’s involved and agrees to it. This is about more than just money; it’s about trust and being there for each other.
An important first step is getting yourself ‘mortgage ready‘. This is simply being organised and knowing all of your financial information and having up to date documents etc. You would also get a copy of your credit report to check everything looks OK.
Next, you’ll need to find a mortgage that suits you.
This means looking at different banks and what they offer for family deposit mortgages and family assist mortgages. Each bank has its own rules and deals, so it’s worth taking the time to compare them.
Once you’ve found the right mortgage, you’ll need to gather all your financial information, like your income, expenses, and credit history. This helps the bank decide if they can give you the mortgage. You’ll also need details about the family member who’s helping you and how much they can contribute.
Then, you submit your application to the bank. They’ll look at everything and decide if they can offer you the mortgage. Remember, it’s not just about your finances; the bank also considers your family’s situation.
Getting help from a mortgage broker will make this process easier. They can guide you on what information you need and which banks might be best for you.
Which Lenders Offer Them?
Not all lenders offer these types of loans.
But, there are several who do, and each one has their own special version.
Big banks like Barclays, Nationwide, and Lloyds are some examples where you can find these kinds of mortgages. Each of these lenders has different features and conditions for their own family mortgage products.
What’s important here is to shop around a bit.
By looking at different lenders, you can find the one that has the best deal for your situation. Some might offer better interest rates, others might have more flexible terms about who in your family can help, and some might let you borrow more money.
An independent mortgage broker can do all of this for you, saving you loads of time.
It’s their job to scour the mortgage market to find deals that suit you the best.
Several lenders offer mortgages that are backed by family members or close friends, often under various names like family assist, springboard, or lend a hand mortgages.
Each lender has specific terms and conditions for their products.
- Tipton & Coseley Building Society provides the Family Assist Mortgage, allowing borrowers to secure a mortgage with no deposit. Family members can either place a cash deposit in a Family Assist savings account or use their property as collateral.
- Barclays offers the Family Springboard Mortgage, where family members or friends can help by depositing 10% of the property’s price into a Helpful Start account. This amount is returned after 5 years with interest, provided the mortgage payments are made on time.
- Lloyds Bank has the Lend a Hand Mortgage, where family members can deposit 10% of the purchase price into a savings account, returned after 3 years with interest.
- Mansfield Building Society offers the Family Assist mortgage, requiring collateral held for 7 years.
- Generation Home provides the Income Booster, allowing a family member’s income to boost the borrower’s affordability.
- Nationwide offers a Family Deposit Mortgage, where family members can borrow against their property’s equity to provide a deposit.
- Vernon Building Society and Metro Bank have schemes where family members can be part of the mortgage agreement without being co-owners of the property.
- The Family Building Society offers multiple options, including savings or property as security and joint mortgage arrangements.
- Halifax provides a Family Boost Mortgage, similar to Barclays’ offering but with a 3-year term for the savings account.
Please note that this list was correct at the time of publishing. Always check the upto date details with your broker before proceeding.
What are Springboard Mortgages?
You might have heard of Springboard Mortgages and wondered if they’re the same as family deposit mortgages.
Well, they’re similar but not exactly the same.
Springboard Mortgages are a type of family deposit mortgage offered by some banks, like Barclays with their ‘Family Springboard’ mortgage.
The idea is pretty much the same: a family member helps you buy a home by providing some financial support. This support can come in different forms, like putting savings into a special account linked to your mortgage.
The main thing that makes Springboard Mortgages a bit different is how they’re set up by specific banks. Each bank that offers a Springboard Mortgage has its own rules and features. For example, they might have specific requirements on how much the family member needs to contribute, how long the money needs to stay in the account, and the types of properties you can buy.
In short, while Springboard Mortgages are a kind of family deposit mortgage, they have their own unique setup and rules depending on the bank that offers them. It’s like a special version of the broader idea of family members helping out with buying a home.
Alternatives to consider
Family deposit mortgages aren’t the only way to get help buying a home. There are a few other options you can think about too.
These alternatives might be better for some people, depending on their situation.
Guarantor mortgage
One option is a guarantor mortgage. In this kind, someone in your family, like a parent, agrees to be a guarantor. This means they promise to cover the mortgage payments if you can’t make them. It’s a way for them to help without needing to put down a deposit.
Gifted deposit
Another choice is a gifted deposit. This is when a family member gives you some money to use as a deposit. It’s a straightforward gift – you don’t need to pay it back.
Joint borrower sole proprietor (JBSP)
Then, there’s joint borrower sole proprietor mortgages. In this case, a family member is on a joint mortgage with you, helping you to borrow more. But they don’t own part of the property; you’re the sole owner.
Family offset mortgage
A family offset mortgage, or parent offset mortgage, works by linking your new mortgage with savings from family members. This has the effect of reducing the mortgage interest payable to the lender and so makes your mortgage a little cheaper.
Concessionary purchase
A concessionary purchase means buying a property at a discounted price, compared to it’s open market value. Sometimes called below market value. Your family could sell you a house at a discounted price and you would use a concessionary purchase mortgage to provide upto 100% of the purchase price.
Each of these options has its own pros and cons, just like family deposit mortgages.
It’s all about finding what works best for you and your family. Talking to a mortgage adviser will help you see all the different paths you could take to get your home.
Find a Specialist Family Mortgage Broker
Finding the right mortgage can be a bit of a puzzle, especially with all the different options out there.
That’s where a specialist family mortgage broker comes in. They’re like a guide to help you through the maze of mortgages.
A good mortgage broker knows all about the different kinds of mortgages, including family deposit mortgages.
They can help you understand which one might be best for you. They’ll look at your situation and match you with the right mortgage based on what you can afford and what you need.
The great thing about using a broker is that they often have access to deals that you might not find on your own. They can also explain all the complicated parts in simple terms and give you advice on what to look out for.
So, if you’re thinking about a family deposit mortgage, or any kind of mortgage really, talking to a specialist mortgage broker can be a really smart move.
Let Respect Mortgages help you get the right mortgage advice.
We can match you to an award winning independent mortgage broker for free. They specialise in family mortgages and have brokers all over the UK.
To get started, call us on 0330 030 5050 or tap the button below.
We’ve covered a lot about family deposit mortgages.
They’re a great way to get into a home, especially if you’re finding it tough to save for a big deposit. With the help of your family, you can make your dream of owning a home a reality. But, it’s important to remember that this kind of mortgage isn’t for everyone. It’s a big decision, not just for you, but for your family too.
We talked about how these mortgages work, who can help you, and what you need to think about before deciding. There are pros and cons, and it’s key to understand them all. Don’t forget there are other options out there too, like guarantor mortgages or gifted deposits, which might be better for your situation.
At the end of the day, the most important thing is to make a choice that’s right for you and your family. Take your time, talk things through, and get some advice from a specialist mortgage broker. This way, you can step into homeownership with confidence, knowing you’ve made a well-thought-out decision.
A family deposit mortgage differs from a traditional mortgage in that it involves a family member providing financial support to the borrower.
In a traditional mortgage, the borrower typically saves for their own deposit, whereas in a family deposit mortgage, a family member’s savings or property equity is used as security for part of the mortgage, allowing for a lower deposit requirement.
Generally, immediate family members such as parents, grandparents, or siblings are the ones who can provide assistance for a family deposit mortgage. Some lenders allow non-family members to help.
Yes, some lenders may allow the use of a family member’s property equity as security for a family deposit mortgage. However, this can vary between lenders, and it’s essential to check with them for specific eligibility criteria.
It’s also possible to use a lifetime mortgage to access the home equity and generate a cash gifted deposit.
Yes, several lenders in the UK offer family deposit mortgages. Popular options include Barclays Springboard Mortgage and Lloyds Bank Lend a Hand Mortgage. It’s advisable to compare different lenders and their terms to find the most suitable option.
Yes, some lenders in the UK offer 100% mortgages, where you don’t need to provide a deposit. However, these mortgages may have stricter eligibility requirements, higher interest rates, or other conditions to consider.
Family deposit mortgages tend to be aimed at first-time buyers. Some lenders may extend this option to home movers as well. It’s important to check with individual lenders to understand their specific requirements.
The Mortgage Guarantee Scheme is a government initiative to encourage lenders to offer 95% mortgages.
It doesn’t directly give borrowers a financial benefit, or guarantee. The aim is to widen the number of mortgages where you only need a 5% deposit.
