A lot of first time buyers have had to turn to the bank of mum and dad in order to get a foot on the housing ladder, but what choices are available to family members who want to help?
One option is a family offset mortgage. This could prove a popular choice for parents who do not want to give away out several thousand pound, but do want to help their son or daughter get a contractor mortgage.
Only a couple of the smaller building societies offer these deals at present, but now the Woolwich is considering launching a family offset mortgage.
With a family offset home loan, parents deposit money into a savings account that is linked to the mortgage. The money is used to provide a deposit and reduces the monthly mortgage repayments. The downside is that the money is effectively locked away until 25% of the mortgage has been paid off. However, the parents retain ownership of the money and if a couple splits up and the property is sold, the other party does not get any of the deposited funds.
The Newbury and the Marsden Building Society are the only ones offering these deals at the moment.
The Lloyds Lend a Hand scheme works on a similar basis whereby parents deposit 20% of the purchase price into a savings bond which then earns interest.
Another option that could appeal to parents is a guarantor mortgage. Parents can either use the equity in their current home, or their savings as guarantee. The downside with this sort of deal is that the parents are liable if the borrower defaults on the loan.
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