Family Assisted Mortgage: A Comprehensive Guide to Helping Your Loved Ones Achieve Homeownership

Older family members assisting with their childrens mortgage

Table of Contents

Family Assisted Mortgage: Your Complete Guide to Helping Loved Ones Buy a Home

Owning a home is a dream for many, but with rising property prices and stringent mortgage requirements, it can be difficult for first-time buyers to make this dream a reality. This is where a family assisted mortgage can make all the difference. In this comprehensive guide, we will explore the concept of family assisted mortgages, their benefits, and how they can help your loved ones achieve homeownership.

What is a Family Assisted Mortgage?

A family assisted mortgage, also known as a family deposit mortgage or family springboard mortgage, is a type of mortgage product that allows family members to provide financial assistance to their loved ones for purchasing a property. This assistance typically comes in the form of a cash deposit, which is either held in a savings account or used as collateral against the mortgage.

Key Benefits of Family Assisted Mortgages

There are several benefits to using a family assisted mortgage, including:

  1. Lower deposit requirements: With family assistance, first-time buyers can often secure a mortgage with a lower deposit than would be required otherwise. This makes it easier for them to enter the housing market.
  2. More favorable mortgage terms: The additional security provided by the family’s deposit can result in more attractive mortgage terms, such as lower interest rates or reduced fees.
  3. Helping loved ones without depleting savings: Family members can provide financial assistance without having to give away a large sum of money permanently, as the deposit is often held in a savings account and returned after a specified period.

How Does a Family Assisted Mortgage Work?

There are several ways a family assisted mortgage can be structured, depending on the specific mortgage product and the needs of the borrowers. Here are some common options:

Savings-Backed Mortgages

In a savings-backed mortgage, family members contribute a cash deposit, typically ranging from 10% to 20% of the property’s value, which is held in a designated savings account for a specified period (usually 3-5 years). The first-time buyer can then secure a mortgage with a lower deposit, and the family’s savings are returned (plus interest) at the end of the term, provided the mortgage payments have been made on time.

Guarantor Mortgages

In a guarantor mortgage, family members offer their property or savings as collateral against the mortgage. This means that if the first-time buyer defaults on their mortgage payments, the family member’s property or savings could be at risk. However, this option can help borrowers secure a mortgage even if they have a small deposit or a less-than-perfect credit history.

Eligibility Criteria for Family Assisted Mortgages

Both the first-time buyer and the family member providing assistance must meet certain criteria to qualify for a family assisted mortgage. These requirements may vary between lenders, but generally include:

  • The first-time buyer must be over 18 years old and have a stable income.
  • The family member providing assistance must be a close relative (parent, grandparent, or sibling) and have sufficient equity in their property or savings to cover the required deposit.
  • Both parties must pass the lender’s credit checks and affordability assessments.

Choosing the Right Family Assisted Mortgage

With several types of family assisted mortgages available, it’s essential to choose the right one for your specific situation. Consider the following factors when making your decision:

  • Flexibility: Ensure the mortgage product offers the flexibility you need, such as the ability to make overpayments or the option to release the family’s deposit early.
  • Interest rates: Compare interest rates and fees among different lenders to find the most cost-effective option.
  • Terms and conditions: Carefully review the terms and conditions of the mortgage to ensure you understand
Picture of Author: Stuart Phillips

Author: Stuart Phillips

Fully CeMap qualified, Directly Authorised by the FCA and with over a decade of experience, Stuart has a wealth of experience in both specialist BTL and residential mortgages.

Need help with Family assisted mortgage?

Here at AALTO Mortgages we have extensive experience with Family assisted mortgage. Click below for contact options , or call now on 020 7183 1101 to speak with an experienced broker.
Get in touch

Contact Us

020 7183 1101

Services we offer

Related Articles

A british soldier standing in front of their new house denoting the theme of mortgages for armed services

A Comprehensive Guide to Mortgages for UK Military Personnel

Elderly couple signing documents at their dining table

Navigating the Intricacies of Retirement Interest-Only Mortgages: A Comprehensive Guide

An older couple in a modern setting signing a document on a tablet.

Navigating the Mortgage Landscape for Individuals Over 50: An In-Depth Guide

Rugby player signing a contract with a ball on the table

Mortgage Challenges & Solutions for Professional Athletes in the UK

Sign Up to the Newsletter

Get a weekly newsletter  with the latest rates, industry news and featured posts