Making the Bank of Mum & Dad benefit parents as well as their kids
The Bank of Mum & Dad was trending on Twitter earlier in May after research from Legal & General found that it was on track to lend over £5 billion in 2016*. The research showed that 25% of all property transactions this year will involve support from family and friends, providing deposits for over 300,000 mortgages. That makes the Bank of Mum & Dad the equivalent of a top 10 mortgage lender in the UK.
Interestingly, the study found that 57% of Bank of Mum & Dad contributions are gifts, 18% are loans with no interest and 5% are loans with interest*.
A gift or a loan? The Bank of Mum & Dad dilemma
You want to do all you can to help your loved one afford their first property to buy. But the average financial contribution from The Bank of Mum & Dad is £17,500*. That’s a lot of money to give away.
An alternative might be to offer the money as an interest free loan, but imagine the interest that money could be earning in a savings account.
So maybe you could ask your loved one for interest on the loan. But doesn’t that seem a bit tough? After all you’re a parent, not a bank!
The solution: the Family Springboard Mortgage allows you to support a loved one while still earning interest on your savings
How does it work?
- The borrower takes out a Family Springboard Mortgage with as little as a 0% deposit.
- The helper opens a Helpful Start Account linked to the mortgage and puts in 10% of the property purchase price.
- The borrower purchases the property for sale and makes monthly mortgage payments.
- After 3 years the helper gets their money back with interest, as long as the payments are kept up to date. The interest rate for the savings is set at a competitive 1.5% over the base rate (so currently 2%).
Who is it for?
- The Family Springboard Mortgage will clearly appeal to first time buyers, but is also available to buyers who currently own a home or have owned before.
- The Family Springboard Mortgage is available for properties for sale up to the value of £500,000
- It is not available for new build properties.
What are the rates?
|Product||3 year fixed|
|Initial interest rate||2.99%|
|Follow on interest rate||Lender's SVR (currently 2.99%)|
|Maximum loan to value||100%|
|The overall cost for comparison is||3.1% APRC|
|Lender's arrangement fee||£0|
The "helper must take independent legal advice before the mortgage can complete. The early repayment charge is 3% of the balance repaid for the inital term. Valuation fees and legal costs apply. Terms and conditions apply.
Come in and talk to us about flexible ways to purchase
To find out more about this mortgage and the other products we have on offer to make the costs of moving more bearable, book an appointment with one of our Financial Consultants. They will look at your circumstances and recommend the best options for you.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.