With house prices continuing to rise it is becoming more and more difficult for First Time Buyers to get on the property ladder.
A lot of first time buyers are now turning to the Bank of MUM & DAD for help or Grand Parents.
They are normally in a position to provide their Children / Grand Children with a deposit but are asked to confirm that they will not have a financial interest in the property.
Below is an option potentially available
The Property is Valued at £150,000. First Time buyers borrow 100% of the purchase price (£150,000)
The Lender applies an interest rate fixed for 3 Years over the mortgage term 25 years (maximum).
The Parents / Grand Parents or other Helper place 10% of the purchase price (£15,000) into a Bank Account for the first three years of the mortgage. This account is an interesting bearing account.
At the end of the three years the money is returned to the Parent(s) / Grand Parent (s) or other Helper(s) with interest as long the mortgage payments have been made on time and in full.
The Mortgage then reverts to a Tracker rate with no penalties meaning that you are free to look at what other options are available to you (This would be dependent upon the Value of the property at that time and your financial circumstances).
The Benefit to the person placing the deposit into the account is that they are not considered to be guarantors and the buyers have full ownership of the property at all times.
This is a alternative option available and but as is the case with all mortgages you will meet the full application criteria which will include details of income, details of any outstanding credit commitments and you have to have a clear credit profile.
So what will the mortgage payments be ?
So based on a Purchase Price of £150,000 and a mortgage loan of £150,000 over 25 years and a current fixed rate of 2.95%
The Monthly Mortgage payment would be £707.42.
At the time of writing this article the Lender will provide you with a FREE mortgage valuation of the property along with no lenders arrangement /booking fee.
It is advisable that all parties take independent legal advice.
Manchester Mortgages have been providing mortgage advice to clients for 18 years and are now arranging mortgages for our original clients children and we are able to provide solutions to most situations.