Family springboard mortgage guide
If you are unable to save enough money to buy a home, a family springboard mortgage or family deposit mortgage could be an option.
A family member will need to be willing to assist you financially by depositing savings into the lender’s account.
However, these agreements can prove mutually beneficial for both of you.
What is a family springboard mortgage?
A family springboard mortgage or a family mortgage with a 5% deposit is a type for those who have a relative willing to help them by putting savings in an account that will be used to offset the mortgage.
Lenders may have different restrictions and criteria regarding springboard mortgages.
What is the secret to their success?
The buyer makes a 5% deposit and borrows 95% like a traditional mortgage. However, a relative (mum/dad/grandparents/other family members) deposits 10% of the purchase price in a savings account. The lender takes a charge of the funds in case of default.
Example of a family springboard mortgage repayments
A buyer wishes to buy a property for £200,000. He or she deposits 5% of the deposit, and borrows £190,000. (95%), and his/her parents deposit 5% of the deposit into a 5-year account (where it earns a good rate) that will hold the £20,000 (10%) for five years.
The lender will release the charge after 5 years. Funds in the account can be moved with no penalty as long as mortgage payments have been made on time.
Why would you take a mortgage with a springboard?
A family deposit mortgage is a popular choice because it allows them to avoid being denied a mortgage without parental support. Two main benefits are also available.
Get deals on a family boost mortgage
A springboard mortgage offers the advantage of being able to buy at a lower rate than a traditional 95% deal. This is because the lender has to assume 85% of the property’s value.
Help with family deposit mortgages without giving cash
Parents may find this option appealing as it gives them the assurance that the money they deposit into the account will be returned.
This allows them to give their children the gift of help without having to part with cash that they don’t want!
What amount of deposit would I require?
Springboard Mortgage lenders require a minimum of 5% deposit. You will need to make a deposit.
This could happen:
- Remortgaging to free equity to purchase another property
- Other assets may be sold
- Personal loan
- Gifted deposit*
- Rental income from a mortgage
*Some lenders will accept a gift deposit from a family member.
The person who gifts the money must be aware that they will not receive their money back and have no interest or share in the property. A letter to this effect is required by most lenders who offer family springboard mortgages.
Can I get a family mortgage without putting down a deposit?
Yes. Yes. There are now a few specialist lenders that offer a mortgage with a 0% deposit. This is the first time since the credit crunch. Our advisors know these lenders and arrange these mortgages regularly.
This is great news for those who don’t have any deposits but are able to borrow money from a relative or parent.
This can mean first-time purchasers are able to buy property faster and not have to live at home for many years as they save a large deposit.
Below is an example of a Family Springboard Mortgage.
This is just an example, and it may not be representative of all lenders.
(Deposit amount is based on the lender’s required deposit percentage and 10% security deposit from parents.
What is the maximum amount I could borrow for a springboard mortgage
Lenders use a more complicated model to calculate affordability, but generally limit loans to a multiple of your annual income. Most lenders will limit loans to 4x per year (so someone making PS25k wouldn’t be able to borrow more than PS100k), but some will allow 5x income and a few will even offer 6x income depending on the circumstances.
There are fewer springboard lenders available than there were previously, which means that the number of income multiples and options for mortgages are limited.
The income you earn and any other financial commitments (e.g. getting a loan with debt) are also important. A lender will not offer you a mortgage if you have more debt than you can afford. Your income is more unpredictable and less reliable.
How to get a mortgage with a springboard
A 5% deposit is required and a relative will be willing to put 10% of the property’s worth into a savings account owned by the lender. These items will be required for the mortgage application. You should read our complete guide to the mortgage application.
Before you rush to make your move, speak with a broker who specializes in springboard mortgages. They will guide you through the entire process and help you locate the best rate lender for you.
A broker can assist you with any additional paperwork required for a springboard loan. A broker can help you with any document and double-check that it’s been completed correctly.
My parents could get a springboard mortgage to help them earn interest.
Yes. It can help to understand how much interest is accrued when weighing the pros and cons of a springboard mortgage.
Different interest rates are offered by different lenders. Make an inquiry to ensure you get the best mortgage terms. One of our specialists can help you determine what type of interest rates and terms are available.
What would happen to my parents’ money?
As security, the money saved in savings is used to pay any shortfall in case the property is seized and sold with negative equity.
Parents can withdraw their money from most springboard mortgages after three to five consecutive years of regular payments.
What happens if you miss your mortgage payments?
Repayments must be made on a timely basis, as with all mortgages. Your parent’s money may be held until you can make your mortgage payments.
Lenders will even tell you that three missed payments can result in the money being held on until your accounts are current and there are no missed payments within 12 months.
A springboard mortgage is not something to be taken lightly.
Is there a way to calculate a springboard mortgage?
Lenders often use a family-springboard mortgage calculator to determine how much borrowers can borrow. However, each lender is unique and may use other affordability factors as well.
You may get a different estimate from every lender on how much you can borrow. If you don’t like the quote, please let us know.
Can I get a family mortgage for a springboard?
Yes. Yes. Having additional security from your family’s savings could even increase your chances of getting mortgage approval with certain types of bad credit.
It all depends on your credit score, age, severity, and cause. A bad credit mortgage broker can also help you. To learn more, visit our How to Get a Bad Credit Mortgage page.
Talk to an expert about family mortgages
As it is a big commitment for everyone involved, we recommend that you seek advice from one of our expert mortgage advisors before applying for a springboard loan. Some lenders may require that the person who made the savings deposit seeks independent advice prior to proceeding.
The right advice can help you relax, especially in a stressful or daunting time. A mortgage advisor can help you find the right lender for you and guide you through the process of applying for a springboard mortgage.
A broker who is knowledgeable can help you evaluate reviews and compare the rates of family deposits to find the right lender for you.
Is it possible for more than one person to help with the springboard deposit
Yes, it is possible. You would need to open a separate account with separate security deposits for each family member.
Is it possible to withdraw money from your account in an emergency situation?
With a springboard mortgage, would I be able to take full ownership?
Are first-time buyers eligible for a springboard loan?
No. This type of mortgage is also available to home-movers
What length would the mortgage term last?
A Springboard mortgage is typically payable for 25 years.
Can I get a Springboard Mortgage for a new building?
You will not be allowed to make a family deposit for a property that is being built.
Who provides springboard mortgages?
A few lenders offer this product or an equivalent.
- Post Office Money
- Family Building Society
- All over the country
There are many more. However, it is important to remember that family springboard mortgage terms can vary greatly from one lender to the next.
You will deal with the lender’s in-house broker if you contact them directly. You may be subject to a credit check, which can leave marks on your credit score.
We recommend you work with one of our advisors. They will help you find the best family mortgage for your situation, regardless of your credit score.
All of our lenders are regulated by the financial conduct authority. You should seek independent legal advice before getting on the property ladder and lending from family or friends. Do not take mortgage advice from friends.