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It isn’t easy to get on the property ladder but it has now become increasingly difficult with soaring property prices and stricter lending requirements. More and more people rely on help from family and close friends to get a mortgage loan and springboard mortgage is a type of product which can help facilitate this. It is available to first time buyers and existing home owners. There are options on the market which require no deposit upfront.
How does springboard mortgages work?
Springboard mortgage also known as family deposit mortgage, works in a similar way to guarantor mortgages. Essentially a family member would put a percentage of the property price into a savings account held with the lender for a specified period of time, usually being a few years. Interest is earned on the sum in the savings account. After a few years, equity will have built up in the property from monthly mortgage payments and all of the money in the savings account is returned after the agreed period has ended, including the interest earned. It is not possible to access the money that is in the savings account before the agreed period has ended, even for emergencies.
All monthly mortgage repayments will be required to be paid on time as stipulated by the lender, just like any other type of mortgage. If payments are not met then the money in the savings account will be held until mortgage payments are up to date. If the situation worsens and the property is repossessed then the money in the savings account can be used to burden any losses to the lender. It is wise to think through if you can commit to the financial responsibility of repaying a mortgage loan.
How much deposit do you need?
Usually a deposit of 5% is favourable although it is possible to be accepted with 0% deposit, depending on borrower and how much is placed into the savings account for a springboard mortgage. Having 5% deposit will strengthen your application and may increase your chances of being accepted for a mortgage loan and possibly allow you to unlock better interest rates.
Property value = £250,000
Borrower has £0 deposit.
Family or close friend contributes 10% of the property value and puts £25,000 into a savings account with the lender.
Borrower makes monthly payments to repay the mortgage loan.
After a few years, the £25,000 including any interest earned will be returned to the family or friend.
More about springboard mortgages
• If you have bad credit, you may be able to get a springboard mortgage but this is be dependent on the lender.
• More than one person can assist with the springboard deposit by setting up separate savings account.
• You retain full ownership of the property.
• Some lenders may consider accepting benefit income although the amount may vary depending on the lender.
Where can I get a springboard mortgage from?
• Barclays Springboard Mortgage
• Halifax Springboard Mortgage
• Nationwide Family Deposit Mortgage
• Post Office Family Link Mortgage
• Family Building Society Family Mortgage
• And more
You can find a few lenders on the market offering springboard mortgage products and there are increasingly more deals available but it is good to note that each lender has their own criteria’s and requirements and not all lenders and their products could be suitable for your individual needs and circumstances. Speaking with a mortgage advisor could help streamline your process so you don’t have to reach out to every lender, as a professional will be able to help direct you to deals most suitable for you.