Bank of Mum & Dad

The family mortgage taking the pressure off the bank of mum and dad  

Gifting a cash lump sum for a property deposit is a consideration for many parents, but for some, it also carries a significant financial burden as they compromise their future to help their children realise their dreams.

The act of ‘gifting’ a sum of money to be used as a deposit, means that there is no expectation for it to be repaid. Indeed, most mortgage lenders require written proof that a gifted deposit will not ever have to be repaid.

For parents where gifting a significant chunk of their savings could negatively impact on their personal future, there is an alternative; Barclays Family Springboard mortgage could alleviate the pressure on the Bank of Mum and Dad.

Families, or even friends, can act as mortgage guarantors and deposit savings of 10% of the property price into a ‘Helpful Start’ Barclays account.  The condition is that the money has to remain in the account for five years untouched before it can be released.

Benefits for guarantor and first-time buyer

The expectation is that during these five years the first-time buyer should have paid enough off their mortgage so that they can remortgage to a lower loan-to-value mortgage and the ‘deposit’ is returned to the guarantor with interest.  The account tracks 1.50% above the Bank of England base rate, which would mean the guarantors get a 2.25% return on their ‘investment’ as it stands today.

In real terms that means a parent putting £20,000 into the account, assuming the base rate stays the same, would get back £2,252 in interest.

A good deal for first-time buyers?

Barclays has recently stepped up the Family Springboard offering with a raft of changes; the fixed rate period of five years is an improvement on the three years previously offered. The mortgage term has also been extended from 25 to 35 years, meaning first-timers will be able to borrow a larger sum over a longer period to help keep repayments down.

A five-year fixed rate is available at 2.95% with a 0% deposit or 2.75% if the buyer has a 5% deposit on top of the 10% savings deposited in a ‘Helpful Start’ account. The mortgage is fee free, and the maximum loan is £500,000.

Hannah Bernard, head of Barclays Mortgages, said: ‘The Family Springboard mortgage has been specifically designed to remove the financial burden from parents and to ensure they receive their deposit with interest at the end of the five-year fixed-rate period.’

Listen to more, on mortgages, in the latest BuyAssociation podcast

This month’s podcast will be covering everything you might need to know about Property Management & Mortgages. We will be joined by Matt Eastham from Easthams & Co – Property Management and Marcus Docker from Visionary Finance. Giving us their insider’s view on everything you need to know in the property management and mortgages markets. Hosted by our very own Katie Walker.

Covering our some of clients top questions and the latest changes in the UK propertymarket. Market trends. Section 21. Letting fee bans. Generation Rent. Buying a property in a LTD company.

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