30 January 2019
Assisting the Bank of Mum and Dad – the family offset
The Bank of Mum and Dad is being called upon more than ever when it comes to helping children onto the housing ladder. However, not everyone has tens of thousands of pounds they can hand over to help with the deposit.
Lloyds announced this week that it is re-introducing its Lend a Hand family offset, and it’s a welcome addition to the lending scene. Parents’ savings – equal to 10 per cent of the purchase price – are offset against the child’s mortgage so that they don’t need to put down a deposit, and crucially, parents can get those savings back after three years. During this time they will also earn interest at a fairly decent rate, when compared with what else is available, of 2.5 per cent.
There are other, similar, products which help parents helping children onto the housing ladder as lenders realise the increasing demand for higher loan-to-values. Equity-backed schemes, similar to the Lloyds one, where a deposit is placed in a savings account and a charge is taken over it, include the Barclays Springboard mortgage and the Family Building Society Family Mortgage. The latter also offers an offset facility although no interest is paid on the savings, as is usually the case with an offset.
Another option is asset-backed schemes where a charge is taken over the guarantor’s residential property, such as Aldermore’s Family Guarantee mortgage.
It may also be worth considering ‘joint borrower sole proprietor’ mortgages, from lenders including Barclays, Metro and Clydesdale. These enable a parent to help a child buy a home with a joint mortgage but the parent does not feature on the title deeds. This helps with affordability and ensures the child qualifies for first-time buyer stamp duty exemptions, as well as no stamp duty surcharge for the parents for purchasing a ’second’ home.