The Bank of Mum and Dad is becoming a more common contributor towards first-time buyer’s deposits.
Not all parents will have enough capital set aside in order to gift the full amount, so it’s good to know that there are now products available that allow parents to place their savings with a lender for three years, which acts to reduce the loan to value on the mortgage. These are called Springboard or Family Mortgages and are available from a small number of mortgage providers.
A client can effectively have a 100% mortgage with savings of 10% to reduce the overall loan to value to 90%. After three years the savings will be released, giving parents a definitive timeline for the return of their money. Ideally, after three years, the loan to value will have reduced to 90% or lower, so when the money is returned the client can then remortgage to another lender on a standard basis.
This option is ideal for parents with more than one child, where they know they will not be able to afford to gift multiple deposits, but can use the same money to help each child and still use those funds ultimately for retirement.