Over the past 12 months we have witnessed a sharp rise in demand for mortgage products which allow parents to give a financial leg up on the property ladder to their children – to many first time buyers the Bank of Mum and Dad offers the only realistic solutions of securing a property, especially in the South East where prices are, largely, far higher than the rest of the UK.
However, those considering helping a loved one secure their first home need to be aware of the stamp duty trap that could snare some unsuspecting parents – remember if you already own a property, then become co-owner of another, you face triggering a 3% extra charge in fees. But help is at hand to avoid such a scenario thanks to the JBSP mortgage.
Until recently, providers of Joint Borrower Sole Proprietor (JBSP) mortgages were few and far between, but a spike in demand has seen an increasing number of lenders come online with such products, and in doing so, allowing parents the solution they have been looking for. This route is by no means a one cap fits all remedy though, and requires a high earner to be party to the mortgage, so excludes retirees. It should also be noted that a parent would not become an owner of the property – only the children’s name would appear on the title deeds of the property.
Family Springboard mortgages offer another option for ‘Bank of Mum and Dadders’… this variant allows a borrower to take out a 100% mortgage, up to the value of £500,000, as long as the ‘family member or loved one’ places a 10% deposit with the lender. Again, this is no magic wand solution, and the first time buyer would need to be earning well above the average wage, but the need for a big deposit would at least be negated thanks to a family member’s secured generosity.
Lenders such as The Family Building Society are emerging as alternatives to the more traditional lenders in the JBSP and Springboard mortgage market and, over the next few years, it is envisaged that this niche will become a mainstream option for more and more families as the UK property market evolves to meet an ever-changing landscape.
Adaptation, and keeping abreast of trends, is where specialist mortgage advisers come into their own – the ability to access lenders from across the whole mortgage industry is key to offering the best advice, rather than being restricted to a narrow band of lenders.
Here at The Financial Planning Group, we pride ourselves on being to offer our clients mortgage products from the whole market, which opens up so many more options and offers – we have 25 years’ experience in helping families find the perfect low-rate deals and ensuring that the financial side of moving home is as stress free as possible.
If you would like to speak about your mortgage or re-mortgage, and secure one of the record low deals that are currently available, please feel call Steve Padgham on 020 8614 4782 or email Steve.Padgham@fpgonline.co.uk