Parental help and guarantor mortgages
Many parents and grandparents want to give their child a helping hand to get onto the property ladder and are in a position to do so. And, with family members willing to take on some of the risk of lending to a first-time buyer, some mortgage lenders are prepared to lend more and at a better interest rate.
With an increasing number of guarantor mortgages available on the market, Key Solutions can work with you to find the most suitable product for you and your family.
How does a guarantor mortgage work?
Much like a standard guarantor commitment, a family member signs up to guarantee that any debt is paid in full. Quite simply, if you miss a mortgage payment then your parent or grandparent, as the guarantor, has to pay it on your behalf.
Typically, your family member would offer their own home as collateral on your mortgage and to be able to do this they will need to have a reasonable amount of equity in their property – 25% is a standard minimum requirement. The lender will then take a charge on their property as security to back the guarantee.
Your guarantor can be removed from the mortgage at a later date, usually once the loan-to-value ratio has reached an agreed level and it has been established that you are comfortable covering the full cost of the repayment yourself.
How does a family offset mortgage work?
Another option for young buyers and their families is a family offset mortgage. It works by your parents or family members putting their savings into an account linked to your mortgage which effectively serves as a deposit on the property you want to buy.
This option also lowers interest charges as the saving balance is deducted from the value of the loan. Whilst it is locked-up for an extended period of time, the benefit to your parents or other family member is that they don’t have to physically pay their savings to the mortgage company.
Making it easier to get help as a first-time buyer