Three mortgage schemes designed to help first-time buyers
If you're a first-time buyer, there are currently a number of innovative mortgage products to help you get onto the property ladder. Here are details about three of the most popular first-time buyer mortgage schemes.
The Springboard Mortgage
Offered by Barclays, the Family Springboard Mortgage aims to help you onto the property ladder with some help from your relatives.
The borrower takes out a Family Springboard Mortgage for up to £500,000 while the helper - typically a parent or grandparent - opens a Helpful Start savings account linked to the mortgage. The helper puts 10% of the purchase price into the Helpful Start account and the borrower can then take a mortgage without putting down a deposit.
The borrower benefits from a three-year fixed-rate mortgage, followed by a lifetime tracker rate and they retain all the rights over the property (this is because the 'helper' is not a guarantor).
The 'helper' cannot access or withdraw the funds until three years have elapsed. At this time they can withdraw the funds with interest.
In addition, the borrower must keep up repayments on the mortgage. If three or more payments are missed the funds will be retained until the mortgage account is up to date, and if the property is repossessed then the funds will be used to clear any losses on the sale.
Lend a Hand
The Lloyds Bank Lend a Hand mortgage is available to first-time buyers with a deposit of at least 5% who have a friend or family member willing to put up savings of a further 20% of the property value.
The required sum for this scheme is 25%, so if the first-time buyer has a larger deposit - say 10% - the 'helper' only has to support with the remaining 15%.
The 'helper' is required to hold their savings with Lloyds for 42 months (3.5 years) and will earn interest on their savings. However, they will not be allowed access to their cash during that time.
The maximum mortgage under the scheme is £350,000.
The Offset Plus
The Yorkshire and Chelsea building societies offer a similar scheme. With their Offset Plus deal, the borrower's 'helper' links their savings to their mortgage. Their cash will be kept in a linked account (which will be in their name) which they can access when they want to. The benefit to the homeowner will increase and reduce in line with the savings balance.
The 'helper' does not receive any interest on their savings under this arrangement but, as well as helping the first-time buyer, it also means they won’t pay any tax on the interest.
The downside for the first-time buyer is that, if the helper takes out their savings, your effective mortgage rate will go up.
The Offset Plus facility, which is available on all the Yorkshire/Chelsea’s regular offset deals, are priced around 0.20% higher than the non-offset versions.
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