Getting on the ladder: the Family Springboard mortgage is just one option for first-time buyers with a low deposit

Family and friends can help you to buy without handing over a penny.
First steps: young buyers often need help onto the property ladder
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Sara Yates26 April 2018

Keen to get on to the property ladder but unable to see how you can manage it without help?

New mortgage products allow your family members to give you a leg up without gifting away their life savings, while developers are offering a range of incentives to hold down your moving costs.

We’ve rounded up some of the latest offers.

The average millennial has just £3,359 in accessible savings. That’s less than a tenth of the £51,821 deposit put down by the average first-time buyer, according to the Office for National Statistics.

Everything you need to know when buying your first home

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For the lucky few, the Bank of Mum and Dad can gift their child the shortfall, allowing them to take out a traditional mortgage.

Apart from the free money, this also means the first-time buyer can stretch further — to five-and-a-half times income — than they could with Help to Buy, and can take on an older, potentially cheaper home than the new-build homes included in the Government’s equity scheme.

But for many parents, waving goodbye to potentially 35 per cent of their overall wealth, money that is often earmarked for their own retirement, simply isn’t an option.

“We have spent a lot of time talking to first-time buyers and their families and we know that parents want to do all they can for their children,” says Owen Woodley, chief executive of Financial Services and Telecoms at the Post Office.

“However, four out of 10 parents, or 41 per cent, can’t provide direct financial support, highlighting a need for mortgages that allow families to support each other without having to part with savings.”

HELP FROM MUM AND DAD, EVEN IF THEY DON'T HAVE A LUMP SUM

New mortgage products let families help without necessarily handing over a penny.

The Post Office Family Link Mortgage allows the first-time buyer to raise their 10 per cent deposit against a close relative’s home, which must be owned outright, and borrow the remaining 90 per cent in a mortgage.

The deposit loan is interest free, but it must be paid back over the first five years in addition to the mortgage payments.

With the mortgage rate fixed for five years at 4.89 per cent, or higher if you opt for a bigger cash back, this may be too onerous for some.

A cheaper option is a Barclays Springboard Mortgage. Here a family member deposits 10 per cent of the purchase price in a Helpful Start linked account. After just three years, the money is returned.

Even better, the account pays an interest rate of 1.5 per cent plus the base rate (currently 0.5 per cent). With UK rates expected to rise and equity markets wobbling over extended valuations and numerous geopolitical concerns, the current two per cent return has appeal.

For the buyer, there’s good news, too. The Springboard Mortgage currently has a three-year, fixed rate of 2.69 per cent if you provide zero deposit. Provide five per cent and the rate drops to 2.49 per cent.

If the problem is that you simply don’t earn enough to take on a full mortgage, consider the Post Office First Start Mortgage.

With this deal the income of your family sponsor is taken into account, potentially boosting the amount you can borrow.

To make it easier still, the borrower only needs to provide a five per cent deposit on the property.

From £395,000: two-bedroom flats at Catford Green in SE6, where Barratt London is paying stamp duty on all first-time buyer homes

Crucially, none of these products requires your family to be named on your deeds, allowing them to help without triggering the extra three per cent stamp duty levied on anyone buying a second home.

ALWAYS ASK FOR A DISCOUNT ON YOUR PROPERTY

Getting the right financing on your home is essential, but don’t forget to get the best deal on your property. Always ask for discount.

If you’re buying new build, whether on Help to Buy or with a full mortgage, take up some of the current offers to cushion your bank balance.

SWERVE THE STAMP DUTY

Barratt London is offering to pay first-time buyers’ stamp duty on all properties at its Catford Green development in SE6.

That’s a saving of £4,750 on its cheapest two-bedroom flats, with a starting price of £395,000.

Buy their “home of the week” and you also get £1,000 help with moving costs. Call 0844 811 4334.

If east London is more you, developer Hill is offering to pay the stamp duty — a saving of £17,875 — on fully furnished two-bedroom flats at its Lanterna Building in Fish Island Village, Hackney Wick.

Prices start from £557,500 and you must be ready to act quickly, as reservations need to be made by the end of this month. Call 020 3906 1950.

From £557,500: fully furnished two-bedroom flats at developer Hill’s Lanterna Building in Hackney Wick come with stamp duty paid if you reserve before the end of the month

At the Vida apartment scheme in East Acton W3, the same developer is offering a free year’s travelcard covering Zones 1-6, plus three years’ free membership of the Car Club with its homes.

On top of which, buyers will benefit from Crossrail’s arrival at Acton mainline station next year. Prices for a one-bedroom flat start from £450,000. Call 020 3910 9750.

If you fancy buying a duplex in SE1, Hamptons will contribute up to £1,500 towards stamp duty and legal fees. Call 020 3369 4382.

There are times when we all need a little help from our friends. These new mortgage products and incentives from developers mean first-time buyers may have more friends than they thought.

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