What is a family springboard mortgage?

Over one third of first-time buyers rely on the bank of mum and dad to help them get onto the property ladder. More parents are providing financial assistance to their adult children than ever before, and it’s a rising trend that lenders are noticing and catering for with their choice of mortgage products.

Introduced back in 2013 by high street bank Barclays, the family springboard mortgage is being rolled out by an increasing number of lenders. Halifax, Nationwide, Post Office and Lloyds Bank are just a handful of the lenders currently offering springboard mortgages under one product name or another.

Whether referred to as a Family Springboard, Family Boost, Family Deposit, Family Link or Lend a Hand Mortgage, these products are making life easier for younger buyers looking to take that first step into property ownership. But, what do you need to know about the springboard as a first time buyer or helpful relative?

How do springboard mortgages work?

The average family springboard product works in a similar way to an offset mortgage or guarantor product. Unlike an offset mortgage however, you are using the savings of a family member or ‘helper’ as security for a mortgage, not your own. In most cases, the helper must contribute at least 10% of the property purchase price.

Who can be a springboard mortgage helper?

With the vast majority of springboard mortgages any family member or friend can provide a helping hand and contribute their savings as security for your mortgage. It is however recommended that they seek independent legal advice before giving their support.

Parents, grandparents, brothers, sisters, aunts, uncles, and even children have acted as helpers to give buyers the financial leg up they need to start their property journeys.

Why should I get a springboard mortgage?

With the security of your helper’s savings seen as the deposit for your mortgage, the buyer can take advantage of all the perks of a zero-deposit or 100% mortgage without the huge interest rates. By using a family springboard mortgage to buy without a deposit, you could save yourself a whole heap of time and money as BBC News explains:

“Saving a large enough deposit is the biggest hurdle for many would-be homeowners, one of the reasons the average age of a first-time buyer has risen to 32. Usually you need a deposit worth at least 10% of the property’s value… The average deposit for first-time buyers is £62,470 according to Halifax, almost double the UK’s average annual salary, with people typically putting down around 20% of the purchase price of their property.”

With a family springboard mortgage, the buyer will also enjoy full ownership, and could even borrow across a longer term to make mortgage repayments even more manageable.

So, what’s the catch?

While family springboard mortgages are high reward, they can also be high risk. For buyers who keep up with their mortgage repayments from month to month, their helper will have their savings (plus any interest accrued) returned to them after a specified amount of time – which is usually five years – providing the property isn’t in negative equity.

If the buyer defaults on the mortgage however, these savings will not be returned and your helper could be liable to pay any arrears due. It is also important to note that you’ll still need to save to cover other property buying costs, including stamp duty and conveyancing fees.

For further advice on family springboard mortgages or to explore the alternatives, contact our independent mortgage advisors today.