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Are you The Bank of Mum & Dad?

New Mortgage Products for family members assisting with a mortgage purchase

Tuesday 23 October, 2018

Thomas Oliver’s Hertfordshire Mortgage Brokers and protection specialists, Vishal Gulrajani and Thomas Wheatley review the new mortgage schemes allowing family members to assist with a mortgage purchase.  

According to BBC News ‘The Bank of Mum and Dad’ will contribute to over 300,000 property purchases this year. However, this is not the only way in which family members are able to help their loved ones get onto the housing ladder. Lenders have started to introduce new schemes in order to allow family members to help each other with a mortgage purchase. 

New mortgage schemes that allow family members to contribute to a mortgage purchase

Vishal Gulrajani, Mortgage Broker in Goff’s Oak & Cheshunt, Hertfordshire said:

The available schemes each have their own sets of benefits and drawbacks and it is essential that these are discussed in detail with both parties in order to decide which scheme best suits a client’s specific situation. For instance a joint borrower sole proprietor mortgage can mean the monthly payments are unmanageable for the applicant who is being assisted, as the term of the mortgage will be dictated by the eldest applicant’s age. However, on the other hand if the eldest applicant is in a profession where they are able to work until the age of 75 some lenders will be happy to consider a longer mortgage term. Allowing the mortgage term to be slightly longer than 70, (which is normally the lenders maximum age) mean the monthly payments may still remain within the client’s budget. Another option mentioned in a recent article in The Times is a product offered by the Family Building Society which provides a lot of flexibility to the clients. In this option the borrowers have to put down a 5% deposit but get enhanced borrowing potential because family members contribute 20% share of the property value. This can be done either from the savings of a family member, a charge over a family member’s property or a combination of both of these. The other major advantage of this product is that the 20% can come from more than one person. For instance if the purchasers were a young couple, one set of parents could contribute 10% of their savings into a savings funds while the other parents could allow a 10% charge to be put on their property.’  

Thomas Wheatley, Mortgage Broker in Tottenham, North London said:

Due to the different available mortgage options and the different sets of benefits and drawbacks of the various products available we recommend that you get mortgage advice through a qualified mortgage broking team to make sure the mortgage product you choose is right for you. When you meet with your mortgage adviser it is particularly important for everyone to attend. If you have family members who want to assist with your mortgage purchase you will need to ensure they are happy with the mortgage process and the mortgage product that your mortgage adviser recommends for you. Your mortgage broker can explain the risks that your family member is taking and the different options which are available to them. At Thomas Oliver our expert mortgage brokers work with our clients to offer a personalised financial planning solution to find the right mortgage for you. We take time to find out all the relevant information from our clients before recommending any mortgage.’

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