Published 31st January 2020 · Updated 15th September 2023 by Martin Alexander
Mortgage lenders are constantly introducing new mortgages to the market. With so much help available for first-time buyers, it seems lenders have adapted to the demand. For instance, Barclays has made a few changes to their existing ‘family springboard mortgage’. Furthermore, there are several other lenders offering family mortgages.
First-time buyers and home movers can get a mortgage of up to £500,000 with the help of family or friends. And you won’t always need a deposit. Such deals can allow you onto the housing ladder where you might otherwise struggle.
Mortgages for families are also available from Nationwide and Lloyds Bank. This guide will explain everything you need about family mortgages, including springboard mortgages and similar deals from other lenders.
What is a family springboard mortgage?
A family springboard mortgage can be used to purchase a home with security provided by family members. Security is offered in the form of savings and is held in a savings account for five years and must be at least 10% of the home value you’re purchasing.
This particular mortgage is available to homeowners and first-time buyers. Although there are other family mortgages available, the family springboard mortgage is a specific deal that only Barclays offers.
The main advantage of a springboard mortgage is that 0% deposit options are available. An incentive for those helping you is that their savings earn interest while providing lenders security, and they help you buy a home!
How does it work?
Rather than receiving a deposit gift, funds are transferred into a savings account linked to your mortgage. This then provides your mortgage lender security if the loan isn’t repaid.
Savings must be the equivalent of a 10% mortgage deposit. For instance, if you’re purchasing a home worth £250,000, your savings account must contain a £25,000 minimum.
Although your mortgage term will exceed five years, money from the savings account is returned to your helper after five years. Furthermore, the security is returned with interest on top. This can vary between 1-2% above the Bank of England base rate.
How much can I borrow on a springboard mortgage?
After five years of mortgage payments, you should have paid enough to remortgage to a regular deal. This is because you’d have repaid at least 10% of the mortgage over five years, so you’d have equity in the property.
Barclays will lend up to 4.49 times your income if you earn more than £50,000, whether a single or combined income. If you earn less than £50,000, you can borrow up to 4 times your income.
For example, if you and a partner have a combined income of £60,000, you can borrow £269,400 (60,000 x 4.49 = 269,400).
If you earn £40,000, you could borrow £160,000 (40,000 x 4 = 160,000).
What other family mortgage deals are available?
A family springboard mortgage is just one of many family mortgages on offer. As a result, you may find a better rate with a particular lender. Furthermore, you may find that another mortgage is just better suited to your circumstances. Santander also offers a step-up mortgage, allowing gifted deposits to help children and family members climb the ladder.
Halifax family boost mortgage
Family boost mortgages are very similar to springboard mortgages from Barclays. The main difference is that funds are held in a savings account for three years, not five years.
Helpers must be family members, and you can have multiple family members helping you. Furthermore, each helper must be named on the Halifax savings account.
The family boost mortgage is better suited if your helper doesn’t want to wait five years to receive their funds back. That said, your mortgage payments may be higher as the initial period is three years instead of five.
Longer mortgage periods mean that repayments are spread out over a longer period of time. This can make them cheaper on a month-to-month basis.
Nationwide family deposit mortgage
Family deposit mortgages are available with the Nationwide Building Society.
Your helper must have an existing mortgage with Nationwide for you to be eligible for a family deposit mortgage. Furthermore, your helper wouldn’t need to deposit funds into a savings account. Instead, Nationwide would use the equity in your helper’s home for security.
This is quite risky, as if mortgage repayments aren’t met, your helper could lose their home. On the other hand, your helper won’t have to part with any savings to help you, which can be a great benefit. Helpers must also be family members and can’t be friends.
Lend a hand mortgage from Lloyds Bank
Lloyds Bank offers a ‘lend a hand mortgage’, and it’s very similar to the family boost mortgage from Halifax.
Family members must place 10% of the overall property value into a savings account for three years. They won’t be able to access the funds for the initial three-year period. Once the three years are up, your helper would get their 10% back plus interest.
You can put a 5% deposit down yourself, but that’s optional. Lend-a-hand mortgages can be used for 100% of the property value, so you won’t need a deposit.
With a fixed interest rate for three years, you’ll know exactly how much your mortgage will cost and be protected from interest rate rises.
Family mortgage rates
Family mortgage rates are currently between 5% and 7%. Rates can be slightly higher than average because lenders are providing 100% loan-to-value mortgages.
100% mortgages are a big risk to both you and your lender. This is because if there was a drop in the market value of your home, you could go into negative equity.
Some mortgage lenders may provide cashback to incentivise borrowers. For instance, you can get £500 cashback from the Post Office and £300 cashback from Lloyds Bank. Offers like these can sweeten the deal, but if you want the best rate, speak to an advisor. We’ll assess your situation to find the best deal based on your requirements.
Alternatives to family mortgages
Family members can help you onto the property ladder in multiple ways. For instance, a mortgage with a guarantor provides security for your lender but not in the form of savings.
Instead, guarantors offer a personal mortgage guarantee, much like family mortgages. In fact, a family mortgage is a type of guarantor mortgage. The difference is that security is placed in a savings account rather than the guarantor acting as security for the lender.
Another alternative is to apply for a mortgage with a gifted deposit. The main difference between a gifted deposit and a family mortgage is that once a deposit is gifted, it doesn’t need to be returned. As a result, it may be easier for helpers to agree to a family mortgage as they know they’ll get their funds back in three or five years (depending on which mortgage you choose).
Mortgage advice for families
Whether you’re helping a buyer or getting help, speak to a specialist before making any decisions. As we’ve outlined in this article, many options exist. Once we understand your situation, we can pinpoint the best deals.
A three-year fixed mortgage may seem better than a five-year deal, but it’s not always the case. You may want lower payments spread over a longer period.
Some borrowers want security, whereas others want to get past the initial period as soon as possible so their helper can get their funds back. You can make an enquiry or call us on 0800 195 0490 to get started.
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About the author
Martin Alexander
Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.