Leading mutual launches 100% mortgage deal - but you'll need your parents' help
The Market Harborough Building Society has become the latest mutual to offer a 'family assistance mortgage' - a scheme which allows home buyers to borrow 100% of the property value on the condition that their parents allow a second mortgage to be taken out on a property that they own.
The scheme is designed to help first-time buyers and those looking to move home. While no deposit is required, the overall loan to value cannot exceed 75%. This means that it will only be available to borrowers whose parents have plenty of equity on their home or another property that they own.
The deal offered is a 1.5% discount to the mutual's standard variable rate, with a current pay rate of 3.99%. There is a 0.5% arrangement fee (minimum £1,250) and early repayment charges of 3% apply in the first three years. It is only available through mortgage brokers.
A spokeswoman from Market Harborough said the lender hoped the deal would help parents who wanted to support their children onto the housing ladder without the need to have large amounts of cash for the deposit.
The Market Harborough is the latest lender to introduce 'family assistance' mortgages which are designed to help parents get their children onto the property ladder, as we see next.
Lots of lenders now allow parents to help their kids onto the property ladder
While standard 100% mortgages are rare, a range of schemes are available to help first-time buyers get onto the property ladder with no deposit. A number of lenders offer schemes which allow parents to assist with a purchase as long as they are prepared to give up some equity on their home.
Barclays offers the 'family springboard mortgage', which allows applicants to borrow 100% loan to value if family can provide 10% of the property’s price - in cash held with the bank - as security. Under this scheme, the family members get their savings back (with interest) at the end of the three years as long as the borrower keeps up repayments.
In the past couple of years, some smaller lenders have also come to the market with similar 100% schemes. The Daily Mail reports that the Family Building Society, Bath Building Society, Tipton & Coseley Building Society, Vernon Building Society, Kent Reliance and Aldermore all offer 'family mortgages' that allow parents to use savings or their home to guarantee their children's mortgage.
Mortgage expert Rob Killeen, says: "Regional building societies take the lead on innovation supporting first-time buyers and Market Harborough's is the latest addition to a range of inter-generational mortgage products.
"The use of parental equity as opposed to using parental investments or savings is a welcome approach in a market increasingly requiring help from mum and dad."