Family assist mortgages allow your family members, and sometimes friends, to help you buy a home. They can enable first-time buyers and those looking to upsize to get a mortgage suitable for the type of property they need, without saving a large deposit.
Essentially they are a modern form of guarantor mortgage, often preferred to traditional guarantor mortgages as they are lower risk for those providing help. This is because the loan is secured on a set amount of the mortgage, rather than an individual potentially being liable to repay the whole thing.
There are a range of family assisted mortgages, which all have slightly different names, depending on the lender. Not all lenders offer this product, and most are offered by building societies, rather than banks. These products work in a fairly similar way, but criteria can vary from one lender to the next.
Some examples of family assisted mortgages are:
Family Springboard Mortgage - Barclays
Family Mortgage - The Family Building society
Family Deposit Mortgage - Nationwide
Family Assist Mortgage - Tipton Building Society
Family Boost Mortgage - Halifax
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.
The specifics of each family assist mortgage vary slightly between products, but essentially it allows home buyers to purchase a property with:
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
It’s possible, yes. You will be assessed on the same criteria as other applicants, but bad credit won’t necessarily mean that you don’t qualify.
In some cases it can be easier to use a family assist mortgage if you have a poor credit history, as the added security can reduce some of the risk to the lender.
No, there are only a few lenders that offer this type of product at the current time. A broker can help you to find the family assist mortgage that is most suited to you, depending on your circumstances and who is able to provide the assistance with your mortgage.
Some lenders are more flexible than others with the type of relationship between the borrower and the helper.
The amount you can borrow will depend on your circumstances, much like any other mortgage application. The difference is that you won’t always need to provide a deposit, or only a small deposit is needed.
You can, however, usually borrow slightly more with help from your family member when compared borrowing independently, as their security will reduce the LTV of your borrowing.
It’s not possible to use a government home ownership scheme such as shared ownership or the first homes scheme with a family help mortgage.
These products are intended for people who do not have financial support available from family members and cannot be combined with other mortgages.