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A Guide to Family Springboard Mortgages

How a springboard mortgage can help you buy a home with as little as 0% deposit

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 24, 2021

A family springboard mortgage, or family deposit mortgage, could be an option if you’re unable to raise enough deposit to get on the property ladder on your own. You’ll need a family member who’s happy to help you out financially by placing savings into an account held by the lender; but these agreements can be mutually beneficial for you and them.

What is a family springboard mortgage?

A family springboard mortgage, or a family deposit mortgage, is a type of mortgage product for people with only 5% deposit and a relative who’s willing to help them out by placing savings into an account that the mortgage will be offset against.

Restrictions and criteria on springboard mortgages can vary greatly depending on the lender.

How do they work?

The buyer puts in 5% deposit, and borrows 95% as with a traditional mortgage, however in addition to this, a family member (mum and dad/grandparents /other family members), deposits 10% of the purchase price into a savings account with the lender, who takes a charge over the funds as security in event of default.

Example

A buyer wants to purchase a property for £200,000, puts up £10,000 deposit (5%), borrows £190,000 (95%), and parents deposit £20,000 (10%) into an account for 5 years (where it still earns an attractive rate of interest).

After the 5 years are up, the lender releases the charge and the funds held in account are free to be moved without penalty, so long as the mortgage payments are up to date.

Why take a springboard mortgage?

Many people choose a family deposit mortgage because they won’t get approved for a mortgage without parental support. Aside from this, there are two main benefits

Potential for a better deal

The benefit of a springboard mortgage is that they usually allow you to purchase at a more attractive rate than for a traditional 95% deal, because the risk to the lender is in effect, 85% of the property value.

Family deposit mortgage help without gifting cash

This option can appeal to parents as it provides the peace of mind of knowing that the money deposited into the account will be returned and that they are able to help their children without gifting cash they’d rather not part with!

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How much deposit would I need?

Most Springboard Mortgage lenders require a 5% deposit, so you’ll need to raise a deposit.

This could be through:

*Some lenders will accept a gifted deposit from a close family member. Those gifting the money must understand that they have no share or interest in the property and will not get their money back. Most lenders require a letter signed to that effect.

Can I get a family springboard mortgage with no deposit?

Yes. There are now a handful of specialist lenders offering a 0% deposit mortgage, for the first time since the credit crunch, and the advisors we work with know who they are and regularly arrange these mortgages.

This is great news for those without deposits, but fortunate enough to have a parent or close relative in a position to deposit money as security against the loan.

It can often mean first-time buyers are able to purchase a property quicker and avoid living at home for years to come, as they try to save a large deposit.

A typical Family Springboard Mortgage example can be seen below.

Please note that this is an example and not representative of all lenders.

(Deposit amount based on lenders required deposit percentage and a 10% security deposit provided by parents.)

Property Price 10% Security Deposit Deposit Percentage Deposit amount (GBP) Mortgage Amount (GBP)
£100,000 £10,000 0% £0 £100,000
£100,000 £10,000 5% £5,000 £95,000

How much could I borrow on a springboard mortgage?

Most lenders calculate affordability using a more complex model these days, but in general will cap loans to a multiple of your earnings. Most will cap at 4x annual income (so someone earning £25k would not be able to borrow more than £100k), some will offer up to 5x income, and a handful even up to 6x income in the right circumstances.

When it comes to springboard mortgages, there are far fewer lenders in the market, and as such, the range of options and income multiples can be limited.

What also plays a part is the type of income you earn, and the amount of other financial commitments you have (such as getting a mortgage with debt). The more variable/less reliable the income, the fewer the lenders, and the more debt you have, the less a lender will be prepared to offer you.

An example of how much a homeowner can borrow based on different income multiples can be seen below:

Income Income Multiples Loan Amount
£25,000 x 4.0 income £100,000
£50,000 x 4.0 income £200,000
Income Income Multiples Loan Amount
£51,000 x 5.5 income £280,500
£70,000 x 5.5 income £385,000

Most lenders only offer a springboard mortgage on properties up to the value of £500,000.

How to get a springboard mortgage

You’ll need a 5% deposit and a family member who’s willing to place 10% of the property’s value into a savings account held by the lender. Assuming you have these things, the mortgage application process is essentially the same as it would be if you were applying for a standard residential mortgage. It’s worth reading up on the documents you’ll need to present in our complete guide to the mortgage application process.

But before you press ahead, you should consider speaking to a mortgage broker who specialises in springboard mortgages. They can guide you through every step of the process and make sure you find the lender offering the best rates, first time.

There may be extra paperwork to complete for a springboard mortgage, but this is something a broker can help you out with too. They can give you a hand with each document and double check that they’ve been filled out correctly.

Could my parents make interest from a springboard mortgage?

Yes. When considering the pros and cons of a springboard mortgage it can be helpful to know how much interest the money deposited accumulates.

Every lender offers varying interest rates. To make sure you get the right mortgage with the best terms, make an enquiry and one of the specialists we work with can help you understand what sort of mortgage terms and interest rates are available to you.

When would my parents’ money be returned?

The money deposited in savings is kept as security and is used to cover any shortfall if the property were to be repossessed and sold with negative equity.

With most springboard mortgages, after three to five years of punctual payments, parents can release their money and then use it for retirement or to place back in their own savings account or other investment.

What happens if the mortgage payments are missed?

As with all mortgages, repayments must be made on time. If you are unable to meet your mortgage payments, your parent’s money can be held until the mortgage repayments are up to date.

Some lenders even state that if three payments are missed, the money will be held onto until accounts are up to date and there are no missed payments within a 12 month period.

Therefore a springboard mortgage isn’t a decision to take lightly.

Is there a springboard mortgage calculator I can use?

Many lenders use a family springboard mortgage calculator to determine how much an applicant can borrow; however each lender is different and as well as using your income, they may also use other affordability factors to calculate the amount.

Therefore, with every lender, you may receive a different estimation on how much you could borrow, so bear this in mind if you use one and feel unhappy with the quote you receive.

Call 0808 189 2301 or make an enquiry and one of the advisors we work with will be happy to answer your questions and find you accurate information about how much you could borrow using a springboard mortgage.

Can I get a family springboard mortgage with bad credit?

Yes. Having the extra security from your family’s savings might even boost your chances of getting a mortgage with certain types of bad credit on your file.

It all depends on the age, severity and reason for your bad credit as well as whether you find the right specialist lender (this is something a bad credit mortgage broker can help you with). Visit our page on how to get a bad credit mortgage to find out more.

Speak to an expert about family deposit mortgages

We always recommend gaining advice from one of the expert mortgage advisors we work with before applying for a springboard mortgage as it’s a huge commitment for all parties involved. In fact, some lenders will stipulate that the person making the savings deposit seeks independent advice before proceeding.

The right advice can really put your mind at ease, especially at a time which could feel stressful and daunting. It can also save you a lot of time as a mortgage advisor can dedicate their time to research the best lenders based on your circumstances and can assist you through the entire process of applying for a springboard mortgage.

A good broker can also spend time going through the varying family deposit mortgage rates and assessing various reviews, in order to ensure you find a lender who is right for you.

The advisors we work with are experts in this area and will be more than happy to help you out. Call 0808 189 2301 or make an enquiry and we’ll introduce you to a broker who specialises in springboard mortgages for a free, no-obligation chat today!

FAQs

Could more than one person help with the springboard deposit?

Yes that is possible. They would need to set up a separate account, with separate security deposits for each family springboard mortgage.

Can you take out money from the account in case of an emergency?

No. The funds will be unavailable until the end of the three-year pre-agreed tie in term (or longer if your mortgage repayments are late or overdue).

Would I have complete ownership of the property with a springboard mortgage?

Yes. The property deeds would be in your name and the property would be owned by you.

Is a springboard mortgage just for first time buyers?

No. This type of mortgage is available for home movers too.

How long would the mortgage term be for?

Typically a Springboard Mortgage is payable over 25 years.

Can I get a Springboard Mortgage to buy a new build?

No. Lenders won’t consider family deposit mortgage applications on new build properties.

Who provides springboard mortgages?

There are a select number of lenders who are now offering this product and equivalents.

These include:

  • Barclays
  • Halifax
  • Post Office Money
  • Family Building Society
  • Nationwide

There are a few more, but it’s important to bear in mind that the family springboard mortgage terms and conditions vary considerably from lender to lender.

If you approach these lenders directly, you’ll be dealing with their own in-house broker, who works for the lender, not you. They often do a hard search of your credit, which will leave marks on your credit history.

We’d recommend that you use one of the advisors we work with. They are experts when it comes to finding the best family deposit mortgage for your circumstances, even if you have bad credit and they won’t leave footprints on your credit rating.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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