Family Springboard Mortgages

If you’re looking to get on the property ladder and have a family member keen to help in some way without handing their money over permanently, a family springboard might be the win-win mortgage for both of you.

Here, we look in greater detail at what these kinds of mortgages involve, who qualifies, why they might be right for you and what you need to do to get one.

What is a family springboard mortgage?

A family springboard mortgage links your mortgage to a friend or relative’s savings account, allowing you to borrow up to 100% of a property’s value. In theory, this means you can get a mortgage with zero deposit.

If you’re the friend or relative, you’ll often need to put 10% of the purchase price into a savings account for a defined period, typically five years.

It works for some people because it’s not a permanent agreement, doesn’t involve your loved one parting with any funds long-term, gives you and the bank security, and opens the door to better deals.

How do they work?

A family member can put some of their savings down as collateral for your mortgage without giving you the money. The funds go into a savings account with the lender for five years, and you borrow normally, making your monthly repayments over this time.

At the end of this period, the funds are returned to your family member plus interest, as long as you have not defaulted. You will have paid enough of the loan balance to take over the mortgage without extra security.

It allows for a better mortgage deal from the bank because, in effect, the lender sees your mortgage as having a lower loan-to-value ratio and, therefore, less risky.

Who can help you?

This varies from lender to lender. For example, Barclays allows family and friends to qualify as your benefactor, while others may stipulate it needs to be a close relative. A good mortgage broker, like the ones we work with, can talk you through your options here and find participating lenders who might be willing to provide flexible options.

What happens if I miss mortgage repayments within five years?

The secure funds put in by your family member act as a backup in this eventuality, so you should be fully informed of what happens in this scenario. Your broker will take you through the small print according to each lender, but the money will likely be held until your payments are up to date, or it could be held for a particular time frame.

How to get a family springboard mortgage

If you think this might be the right mortgage for you, follow these simple steps towards getting one:

1. Speak to your support: Have a clear, considered and open conversation with your loved one about whether they’re willing to help you, what they’re happy to stretch to as a lump sum, and expectations. This commitment involves trust and integrity, as well as a financial agreement, so it should not be entered into lightly.

2. Find the right broker: It is crucial to the overall success of your application to be matched to a specialist advisor with experience working with family mortgages. From the start, they can work with both you and your benefactor to ensure you find the right lenders and products that best suit your circumstances, providing support and expertise.

3. Application process: Now that firm support is in place and your broker has identified the ideal lender, the next step is to provide all the necessary evidence and fill in all required documentation. This might be more complex than with a standard mortgage, but your broker will still be around to assist with this.

How much deposit do you need?

This is for borrowers with a 5% deposit to put down and, therefore, need a 95% mortgage to buy their home. Your backer then makes a 10% contribution that’s locked into an account for five years. This gives the lender the guarantee of a 15% reserve instead of 5%, should they need it.

Can you get a 100% springboard mortgage?

Yes, some lenders offer this, and they will give you a loan deal based on a 90% mortgage instead of an 85% one—albeit this is quite rare. While it’s always better to try and bring down that borrowing with a deposit, this does mean it might be an option if you don’t have it.

Benefits of a Family Springboard Mortgage

There are perks for both the borrower and the family advocate with this particular mortgage product.

For the home buyer:

• It allows a step onto a challenging property ladder when it might be difficult to save for a substantial deposit. This kind of loan allows for a small or no deposit without the additional burden of applying for an expensive 95-100% mortgage, which might also be hard to qualify.
• You also own the property outright without sharing the deeds or getting into a complicated commitment.

For your family or friends:

• They can use any savings they don’t need or want to touch while helping a loved one.
• They will gather a good interest rate during the five years, so they will have made money as long as you’re a solid beneficiary and have not defaulted.
• Some lenders also allow them to help more than one person at once, which works when multiple offspring are buying homes around the same time, for example. Or they can withdraw their money after five years and put it straight into investing in someone else’s mortgage while taking the interest proceeds for themselves.

Risks of a Family Springboard Mortgage

As well as the benefits of this mortgage, there are also some downsides, which we detail below:

• Whoever is helping you is putting their money at risk and won’t be able to access it for a set period.
• If you get a 100% mortgage, you risk going into negative equity if house prices fall.
• You’re likely to be on a higher interest rate than if you can put a deposit of around 10% down.

How much can you borrow?

This will depend on each lender’s individual policies, but the parameters are usually set between £5,000 and £500,000. Your affordability and financial situation will determine how much lenders are willing to offer you.

Most lenders will offer between 4 and 4.5 times your annual income, while others might stretch to 5 times or even 6 times for some borrowers. To get an initial idea of what you might be able to get, try our affordability calculator to help you do your sums.

Which lenders offer springboard mortgages?

Several lenders provide mortgages backed by relatives or close friends. Some might come with a different name, however, so look out for products that are also called family assist mortgages (The Tipton), step-up mortgages (Santander), family boost mortgages (Halifax), family deposit mortgages (Nationwide) or lend a hand mortgage (Lloyds).

Barclays calls this specific product a family springboard mortgage, and while many of them work similarly, there are subtle differences between each one.

Eligibility criteria

Lenders will assess you on the usual criteria they use for would-be borrowers. For example, how old are you? What is your income? What is your credit history like? And how well do you manage your outgoings?

Some springboard mortgage providers will lend to first-time buyers and home movers alike, while others will insist this is only available to those wanting to get a foot on the ladder for the first time.

Find a specialist family mortgage broker

Looking for a very specific mortgage when you’re in a unique circumstance can be overwhelming and complicated. Searching for a niche product needs expert know-how, and this is where your experienced and reliable broker comes in to find the right deal and offer practical solutions.

To find that peace of mind and a safe pair of hands, we can match you to the right broker for your situation. Our highly trained five-star-rated experts offer tailored advice and support and are dedicated to securing your best outcome. Contact us today at 0330 818 7026 for a free initial consultation or make an online enquiry.