Buying Your First Home with Help From Family
The most common type of parental support is a Gifted Deposit. The smallest standard deposit required to raise a mortgage is 5%, which can be several thousand pounds on even a modestly priced home. For a first-time buyer, starting from scratch and potentially already juggling rent and bills, these large deposits can be very difficult to raise by yourself. By using a Gifted Deposit a family member can provide a percentage of this deposit, or even the full amount, as a gift to you. The majority of mortgage lenders are more than happy for you to use a Gifted Deposit, though you should check with them when making your mortgage application, just to be sure. Once we have begun the legal work, we will simply have to ask the family member to complete a form to confirm they are giving you the money as a gift, and will not have any ownership over the property itself.
A relatively new product offered by some lenders is a Family Mortgage (also known at some lenders as a ‘Springboard’ Mortgage). These allow you to raise a 100% mortgage without any deposit at all. Under a Family Mortgage, a parent or other family member will act as a guarantor of sorts, depositing 10% of the property’s purchase price into a savings account with your mortgage lender. After a period of time (usually three years) this money is then released back to them by the lender.
The family member who will be helping you with a family mortgage will usually be required to seek independent legal advice with a solicitor as part of the process, in order to discuss their role and the implications to them.