It has relaunched its enhanced family mortgage, which offers 100% loan-to-value (LTV) for first-time buyers and home movers who get help from family members.
It’s a five-year, fixed-rate deal that charges 5.19% interest and there are no product fees. Customers can borrow up to 5.33 times their income – which is higher than the typical 4.5.
The idea is for family members to provide security for the mortgage, by placing their savings in the building society’s savings account, or by allowing the lender to take a lien over the property in the amount necessary to constitute 20% of the property’s value.
Indeed, those who choose the savings account will have to contribute the equivalent of 20% of the property value. However, they receive interest on this amount.
The security supports the mortgage until the end of the fixed interest rate and is then released subject to conditions.
This latest addition to the 100% mortgage market has been welcomed by brokers.
Michelle Lawson, director of Lawson Financial, based in Farehamspeaking to the Newspage agency, said: “This is a fantastic offer from the Family Building Society for stock-rich, cash-poor parents.”
She added: “This allows them to help their children up the ladder without parting with their savings, investments and everyday cash.
“This also alleviates the tax liability that may arise from donating deposits. It is another example of strong innovation from lenders and the Family Building Society should be welcomed.”
This year has already seen a number of additions to the mortgage market for first time buyers, with Skipton Building Society expanding its ‘Delayed Start’ mortgage and Santander offers a 98% mortgage.
Family Building Society’s latest offering increases the growing choice for those struggling to get on the property ladder.
But how will the product impact the family members who support their child’s aspirations for homeownership?
Jonathan Alvarez Herrera, mortgage advisor at Ringwood-based Ayla Mortgagesdescribed the improved family mortgage, telling Newspage that people should go in with their eyes wide open.
“It provides a real route to homeownership for first-time buyers and movers who may struggle to make a down payment,” he said.
“Although it is marketed with an LTV of up to 100%, it is important to note that this is not a risk-free loan; the family must still provide the equivalent of 20% support through savings, real estate collateral or a combination of both.
“From a late-life lending perspective, this could be strongly attractive to parents and grandparents who are asset-rich but don’t want to do so. cash gift Especially if savings are needed to make pensions more resilient.
“The fact that security is usually only required until the end of the fixed interest rate is also a major advantage compared to longer-term guarantee schemes.
“However, families should seek advice before making a commitment as property pricing could impact future plans such as downsizing, releasing equity or financing later life care.”