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July 14, 2014 12:59 pm
A new building society has been launched, offering mortgages for family members wanting to help each other financially across the generations.
The Family Building Society, part of Epsom-based National Counties Building Society, will advance mortgages designed to allow parents, grandparents or other relatives to use their savings as security against a loan for younger borrowers.
The “Family Mortgage” allows those with deposits as low as 5 per cent to borrow against an interest-paying savings account into which their relatives pay, allowing the borrower to pay a lower rate.
Family members can also forgo interest on their savings to lower mortgage payments.
Mark Bogard, chief executive of the Family Building Society, said the products would help younger borrowers get a foothold on the housing ladder. “We are living longer and need to provide for old age care. Parents want to support their children to independence but have their own needs to consider,” he said. “This is joined-up finance for all the generations.”
A second option in the Family Mortgage allows families to take a charge on their own home as security against borrowing, which also helps reduce the deposit. The measure is designed to appeal to those who may be asset-rich, but who lack cash savings.
David Hollingworth, director at broker London & Country Mortgages, said the Family Building Society had taken an innovative approach to lending with the new products. But he warned that family members would not be able to withdraw their savings for 10 years unless the ratio of mortgage loan to value dropped to 75 per cent or lower.
“With any of these deals I like the fact you retain ownership of cash, but you’ve got to bear in mind that if that doesn’t suit you any more it’s not immediately accessible.”
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Other building societies offer mortgages aimed at the so-called “intergenerational market”. Woolwich’s Family Springboard mortgage allows borrowers to make a deposit as low as 5 per cent if family members can put 10 per cent of the house price into a savings account for at least three years. Aldermore offers first- or second-time buyers a 100 per cent mortgage if relatives can provide a guarantee secured against their own homes.
The Family Building Society is also offering a mortgage for those facing changing personal circumstances, such as divorce, or time off for maternity or paternity leave.
The “Low-Start Mortgage”, an interest-only product, lets borrowers minimise their initial interest payments. It is fixed at 1.39 per cent for the first six months, then 2.69 per cent for the subsequent six months. For the second year, interest-only payments are fixed at 5.39 per cent, before switching to repayment of interest and capital for the third to fifth years. The remainder of the term carries a variable rate of 4.79 per cent.
The minimum property value is £125,000 and buyers must borrow a minimum of £45,000.
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