A new type of mortgage, which allows people to help family members onto the housing ladder without giving away their money, launches tomorrow.
The innovative product, offered by the newly-formed Family Building Society, lets applicants use cash stored in other family members’ savings accounts as security on their loan.
Unlike many traditional guarantor mortgages, the ‘Family Mortgage’ allows parents, grandparents and other relatives to all contribute to the savings pot.
It could therefore be suitable for first-time buyers with relatives who have plenty of savings in the bank.
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Is a ‘Family Mortgage’ right for me?
With house prices continuing to rise, it can be hard for young adults to get on the property ladder without assistance from family members.
At the same time, there are many parents and grandparents who would love to help out their offspring, but are worried about how to save for their own futures.
This new product addresses both of these issues, as family members can use their savings to help their children without giving any cash away.
Applicants can secure the mortgage with a 5% deposit, providing that a further 20% of the loan is stored in a Family Building Society savings account for at least 10 years. Family members can even choose to forego interest on these savings to secure a better rate for the homeowner.
However, those who can provide a deposit worth more than 5% of the property’s value may still be able to access a more enticing mortgage deal.
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Family Building Society to offer mortgages aimed at divorcees
The Family Building Society, which is the UK’s first new building society in over 30 years, will also offer mortgages aimed specifically at divorcees.
The ‘Low Start’ mortgage offers ‘stepped’ low-rate monthly payments for the first two years of the term. It could therefore also appeal to those facing other forms of domestic upheaval, such as the birth of a new child.
Speaking about these new mortgage products, Mark Bogard, chief executive of the Family Building Society, said: “Unlike the big banks, we don’t want to be all things to all people. We just want to serve families with particular needs, really well.”
The building society will also offer specialist savings accounts, equity release and insurance products.
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