What is a family springboard mortgage? (+3 affordability tips)
What is a family springboard mortgage?
A family springboard mortgage is one when the borrower puts down a 5% or 0% mortgage deposit and their family member puts away 10% to 15% of the property price away in a savings account in return for fixed interest.
The family members money will usually be returned within 2to 3 years but if the borrower defaults or misses some payments then it may be held longer.
For a family springboard mortgage, you will usually need a mortgage deposit of 5% but in some cases, a 0% mortgage deposit may be enough.
The different family springboard mortgage providers at the moment are:
How does family springboard mortgage work?
The Family Springboard mortgage isn’t considered a guarantor Mortgage but it kind of works like one. It works by allowing a family member to put 10% of the property price in a savings account for 3 years. Interest is paid on the money and it is returned (+interest) after 3 years although it may be held for a further period if you fail to keep up on your monthly mortgage repayments.
With the family springboard mortgage:
- You have full ownership of the property
- A springboard mortgage term is usually over 25 years.
- Your first 3 years of the mortgage are usually on a fixed rate
- You can get a mortgage for 5.5 times your income (although most family springboard lenders may cap this at 4 times your income)
- You don’t need a mortgage deposit
- You can pay a 5% mortgage deposit to reduce your LTV
- If you miss payments, some lenders will hold the savings until accounts are up to date and there are no missed payments within a 12 month period.
- Self-employed borrowers may find it hard to get a family springboard mortgage (Tip: Use a self-employed mortgage broker)
- You can get the family springboard mortgage with bad credit but you may be limited to your choice of mortgage lenders. (Tip: Use a bad credit mortgage broker)
- Some mortgage lenders may accept benefit income but they will vary in how much of it they accept e.g a lender may accept 90% of income benefits whilst another may accept 40% of income benefits
- You will not be able to access the funds you put in a savings account regardless of if there is an emergency. You will have to wait until the term has expired and then withdraw your funds.
- Two or more people can help you with the family springboard mortgage security deposit by setting up two separate saving accounts
- A family springboard mortgage is available to both home movers and first-time buyers
- The family springboard mortgage can be used with most government first-time buyer schemes
- You cannot use your family springboard mortgage for new build properties due to the fear of negative equity.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.