Family assist mortgages

Which family members can help the home buyer?

All family assisted mortgages allow parents and grandparents to help. Some lenders also allow multiple family members to assist, for example, the parents of both members of a couple who are buying jointly. 

If you’re planning to ask a relative who isn't immediate family, or particularly a friend to assist, you’ll likely have fewer options, but some lenders support this. 

How it works for home buyers

The specifics of each family assist mortgage vary slightly between products, but essentially it allows home buyers to purchase a property with:

Little to no deposit needed

Family assist mortgages are usually offered at between 95-100% LTV (Loan to Value), meaning very little deposit is needed from the borrower. For a 95% LTV mortgage only 5% deposit is needed, whereas for 100% mortgages, there is not usually any deposit requirement at all*.

*It’s important to note that some lenders require a minimum of 1% deposit, even when their product is quoted as 100% LTV, so be sure to check the full terms and conditions.

Full ownership of the property

Although a family member secures a percentage of the value of your home against their savings or property, you would be the sole owner as the mortgage borrower.

A longer mortgage term

Often family assisted mortgages are used by younger applicants, meaning it’s usually possible for the lender to offer extended repayment terms. The average length of a mortgage in the UK is 25-30 years, whereas Barclay's Family Springboard Mortgage, for example, can be taken over up to 35 years*.

*Subject to the age of applicants and those assisting

It’s also worth noting that despite being aimed predominantly at people looking to get onto the property ladder, not all family assist mortgages are exclusively for first-time buyers.

How it works for those helping

Unlike guarantor mortgages, family assist mortgages offer a bit more flexibility when it comes to helping a loved one get onto the property ladder.

They allow you to provide security on the mortgage application for a defined period - usually three to 10 years - although this may vary depending on the borrower’s circumstances. This can be particularly helpful for those unable to offer a gifted deposit permanently.

Assets or savings as security

The security used by those helping can vary from one product to the next. Most commonly, some of your savings are deposited into an account linked to the mortgage. There is also sometimes the option to use a family offset mortgage account for this. You wouldn’t earn interest, but the applicant would have the added benefit of also having lower mortgage repayments due to reduced interest. 

You may also be able to to secure the required amount on your own home - assuming you own it outright or have enough equity to do so. Some lenders allow a combination of these options, as well as allowing multiple parties to assist with the same mortgage application.

Security returned 

After a set length of time the borrower will no longer require the additional security and can continue with the mortgage independently. This is usually once they have reduced their LTV to a level that the lender considers affordable for their circumstances. 

Unless you’ve also opted to hold the security in a family offset account, any funds held as security will be returned to you with interest. If you used your home as collateral the associated charge will be removed from your property.

Things to consider with family assist mortgages

A family assist mortgage offers an excellent option for those borrowers with family and friends willing to help them take out a mortgage. As with any form of borrowing, however, there are always potential risks to be mindful of:

No deposit increases chances of negative equity

Negative equity is where you owe more than the current value of your home. With any mortgage, the lower the deposit provided, the higher the chance of falling into negative equity. This is because your deposit is instant equity, meaning that you own some of the home as soon as you’ve exchanged contracts.

Negative equity usually occurs when property prices fall. A larger deposit therefore acts as a buffer to negative equity until you’ve repaid some of your mortgage. The lower your deposit, the less of a buffer you have. 

Late and missed mortgage payments may affect security collateral

Unlike with a guarantor mortgage, if your loved one is no longer able to afford their mortgage repayments, you will not be responsible for making them. However, the funds or collateral used to secure the mortgage may be affected.

If the borrower makes late mortgage repayments, or misses them entirely, the lender may need to hold onto your security for longer. If they become completely unable to repay the mortgage and the property is repossessed, you may lose some or all of your security funds or collateral. 

Additional criteria

There may be certain additional criteria to meet when using this type of mortgage, which varies from lender to lender. For example, there can be restrictions on the type of property, with some lenders not accepting new build or self-build properties.

You’re also likely to have less control over the type of mortgage and repayment type, it’s very unlikely that you’ll get an interest-only mortgage, for example.