First-time buyers have always found it challenging to get that critical initial step on the housing ladder. In a report on the 13th of August 2020, the BBC advanced four reasons why these hopeful buyers in the United Kingdom might find it more difficult than ever:
- with lenders looking for larger deposits, first-time buyers who save 5% of their income for a deposit may need as long as 30 years’ to save enough;
- an estimated half of all 25 to 34-year-olds who are currently renting simply do not have any savings;
- given the lower-valued homes in which first-time buyers will be interested, the stamp duty holiday available until the end of March 2021 is of no relevance; and
- employment prospects may be patchy and require candidates to move to a different part of the country – a steep expense in itself.
In a story dated the 1st of July 2020, therefore, the Financial Times predicted that the “bank of Mum and Dad” would continue to help support the attempts of a first-time homebuyer to reach the first rung of the housing ladder – an estimated total of £5 billion came from this source in 2019.
What are springboard mortgages?
Barclays Bank – and a few other mortgage lenders – have looked to formalise such sources of help provided by parents and other family members to first-time buyers.
It is Barclays who have coined the term springboard mortgage – other lenders have launched similar schemes under such names as a family boost mortgage, family deposit mortgage, or simply family mortgage.
What they have in common is the principle of the savings offered by parents or other family members to be used as additional security on the first-time buyer’s purchase of a home.
Savings typically equivalent to at least 10% of the purchase price of the first home need to be deposited into a special savings account. This provides additional security which helps the first-time buyer secure the necessary mortgage to buy his or her home.
While the family’s savings need to be kept in the special account as security for a minimum five years, after that interval the savings may be withdrawn again – together with the interest that has been earned on those savings.
This is seen as a win-win result both for the first-time buyer who gets to own their own home and the family members who have supported that purchase and earned interest on their savings into the bargain.
Can I get a 0% deposit family springboard mortgage?
Some lenders have expressed such confidence in 0% deposit mortgage arrangements such as this that they will offer a no-deposit family assist mortgage.
For first-time buyers who are finding it next to impossible to raise funds for a deposit, of course, this might be welcome news indeed. They may be able to get on the housing ladder even sooner than they anticipated – and no longer have to rent or live at home.
How much can I borrow on a family springboard mortgage?
While a spring board mortgage helps instil a greater sense of confidence in the lender, an assessment still needs to be made of your ability to repay the monthly mortgage instalments.
How much you can borrow, therefore, remains a question based on your current income and outgoings, whether you have any deposit to offer, the value of the home you want to buy, your credit rating, and other financial circumstances.
Can I get a springboard mortgage with bad credit?
It may go by several different descriptions, but if you have bad credit, adverse credit, or a poor credit record, it means that sometime in the past you have encountered difficulties in managing your debts. Late payments or defaults adversely affect your credit score.
Even if you have that poor record, however, there are certain lenders – including many in our own network of approved lenders – who remain committed to advancing mortgages to you.
If you have bad credit, you might want to discuss the reasons for such a record with your mortgage adviser or broker who can then help to identify those lenders most likely to entertain your application. With that kind of initial assessment by your mortgage adviser, you may avoid further rejection by any potential lender. This rejection will only serve to undermine your credit status still further.
How can I find the most appropriate deal?
As with any mortgage product – and especially one as relatively new as a family springboard mortgage – you might want to consult your mortgage adviser to secure the most appropriate deal for you.