A new mortgage has been launched to allow parents to help their children onto the property ladder without facing stamp duty charges.
Vida Homeloans has today unveiled its Helping Hand product which allows parents to assist with the property purchase without having their name on the title deeds or jointly owning the property.
It will become the latest offering in the Joint Borrower Sole Proprietor (JBSP) market which allows parents or close family members of the borrower to have their income considered as part of the affordability assessment in a mortgage application.
Under traditional arrangements, if a parent and child are both on the deeds, stamp duty surcharges will apply to all parties. This is because first-time buyers can only benefit from stamp duty relief for properties up to £300,000 if they are the only buyer on the deeds.
Meanwhile parents could also be stung because of the 3% stamp duty surcharge introduced to people owning a second home or buy-to-let property.
But, through JBSP, the surcharge is not applicable and the borrower can take advantage of the stamp duty abolition for first-time buyers because the names are not on the title deeds.
Vida, the first specialist lender to move into the JBSP market, said these mortgages also benefit from easy exits when the child’s income increases and they can afford the loan in their own right.
Louisa Sedgwick, director of sales – mortgages at Vida Homeloans, said: “At a time when first-time buyers are facing significant affordability constraints and house prices continue to rise, we think that Vida’s Helping Hand mortgage will provide a new and interesting option for mortgage intermediaries who want to provide solutions to parents trying to help their children on to the housing ladder.
“It combines the advantages of a JBSP mortgage with our specialist approach to customers who may not fit the criteria currently demanded by high street lenders.”
Meanwhile, Craig Hall, new build manager at Legal & General Mortgage Club said it was ‘refreshing’ to see lenders like Vida supporting the first and next-time buyer market.
He added: “This combined with all the other elements of Vida’s criteria makes this a great proposition for intermediaries, further highlighting the need for independent advice and the value of a broker.”
