A mortgage has been launched which allows family members of first-time buyers to deposit money into a savings account to support the property purchase.
Saffron Building Society’s Family Support mortgage requires the borrowers to provide a 5% deposit. Meanwhile a family member – such as a parent – must provide another 5% of the value, which must be held in a Saffron Family Support Savings Account for the five year term of the mortgage.
The mortgage, which is available through brokers, comes after Lloyds launched the Lend a Hand mortgage for first-time buyers. Lloyds’ product needs no deposit from the buyer but requires a family member to deposit 10% of the property’s value into a savings account with the bank.
Barclays also has the Family Springboard mortgage which offers a 100% loan at rate of 3% fixed for three years for buyers who have a family member willing to deposit cash into a savings account.
Deposit challenge
Saffron said its Family Support mortgage came at a time when raising a mortgage deposit was proving to be a huge challenge, and therefore meant many first-time buyers needed some family support.
Anita Arch, head of mortgage sales at Saffron Building Society, explained its members told them they would like a way of supporting their families financially in the early years of home ownership but, when they found their feet they would like to have the money they provided returned.
“These funds,” she explained, “might be needed as part of retirement planning for example. A gifted deposit is often seen as an ideal way to assist, but ‘gifted’ money is not repayable which means it is not always the ideal solution.”
Arch said the fact the family member providing the support received interest on their funds at the end of the five year term provided a great way for families to help each other and was a welcome addition to the ‘gifted deposit’ option offered on its mortgages.
Gifted deposits are money provided to first-time buyers to help them with their deposit. It is not a loan and therefore the giver cannot charge interest.
