Family Assisted Mortgages

Family Assisted Mortgages (colloquially known as the bank of mum and dad) have become a popular solution for many first-time buyers who would otherwise struggle to buy their first home. This type of product allows family members to support a purchase without necessarily giving away their life savings permanently.

In this guide, we explore the different types of family assisted mortgages available in the UK, how they work, and the pros and cons for both buyers and helpers.

What is a family assisted mortgage?

A family assisted mortgage, which may also be called a ‘helper’ or ‘prop-up’ mortgage, is an umbrella term for any mortgage product where a family member provides financial security to help a mortgage borrower. These are now a very common choice for younger buyers, many of whom wouldn’t be able to buy without the help of their parents or grandparents.

Unlike standard mortgages, where the buyer’s deposit and income are the only factors, family members’ assets, like savings, property equity, or annual income are also used to secure the borrowing.

Types of family assisted mortgages

There are various versions of family assisted mortgages available, which come under various product names, depending on how the product works, and which lender is offering it. These are not always exclusively available to first-time buyers, but are very popular with that demographic.

Here are some of the more commonly known products available:

1. Family Springboard Mortgage (Deposit security)

Popularised by lenders like Barclays, the Family Springboard mortgage allows a buyer to purchase a home with a small deposit, or sometimes no deposit at all.

• How it works: A family member places a sum of money equal to a typical deposit requirement (often around 10% of the property value) into a dedicated savings account. This account is linked to the mortgage until the buyer reduces their balance by a set amount, or for a set period of time determined by the lender. During this time their savings acts as a deposit, and is returned once the buyer(s) has repaid the required loan balance or for the period required

• The benefit to the buyer: They can borrow what they need with a lower deposit, or sometimes without any deposit

• The benefit to the helper: The helper(s) loaning the money have their money returned once the borrowers have repaid the required amount of the loan, provided they keep up with repayments.

2. Joint Borrower Sole Proprietor (JBSP)

A joint borrower, sole proprietor agreement is currently one of the most popular types of family assistance. It is an income booster mortgage, which helps borrowers afford a more expensive home than their current affordability allows.

• How it works: The family member’s income is added to the mortgage application to increase the total amount that can be borrowed. For example, if the mortgage borrower earns £20k and the helper earns £50k, they can often base the borrowing on up to £70k, depending on the helper’s other outgoings. This allows borrowers to take out a much larger loan than they could have individually, and is often helpful for solo buyers

• The benefit to the buyer: They are able to buy a more costly home without adding another person to the property deeds.

• The benefit to the helper: Because they are not added to the property deeds of the person or people they are helping, they are not considered to own a second home, which saves them from paying the higher-rate Stamp Duty often associated with this. They can also help their family member without necessarily having any savings or a charge put on their property

3. Family Guarantee Mortgages

Sometimes known as a family deposit, or family equity charge mortgage, this works similarly to the traditional guarantor mortgage. It’s a potentially suitable route for families who want to help, but their wealth is tied up in their home.

• How it works: Instead of providing a cash deposit, the family member allows the lender to take a legal charge against a portion of the equity in their own property. This means that a banks will own an element of their property until the buyer they are helping has paid off an agreed loan amount to the lender

• The benefit to the buyer: Usually this gives buyers access to 100% mortgage, so they won’t need to save a deposit

• The benefit for the helper: It allows them to help their family without having any liquid assets available

4. Family Offset Mortgages

Family offset mortgages function exactly like standard offset mortgages but use a family member’s savings, rather than the borrower's personal savings.

• How it works: The helper’s savings are placed in an account linked to the buyer’s mortgage. The balance of those savings is offset against the mortgage debt, so the buyer only pays interest on the difference. This can potentially significantly lower their monthly repayments, allowing them to meet affordability requirements that they couldn’t if they had to pay the full monthly interest

• The benefit for the buyer: Because monthly repayments are reduced it allows them to buy a home that they wouldn’t otherwise be able to afford

• The benefit to the helper: The helper retains full access to their savings if they need them, so while removing the savings would increase the borrower’s monthly repayments, it would allow them to quickly access their money in an emergency

Begin your mortgage journey

Get Started

Which family assisted mortgage is right for you?

The table below offers a quick summary of the family mortgage products currently available, along with their risks and benefits to help you decide which one to choose.

Get in touch for a full breakdown of each produce and expert advice about which one best fits your needs.

Pros and cons

Whichever product type seems the most suitable for the buyer and those willing to help them, it’s important to remember that there are pros and cons to every financial commitment. Here are the most significant advantages and disadvantages of using a family assisted mortgage:

For the Buyer

Pros:

• Get on the property ladder sooner

• Potential access to better rates by lowering your LTV

• Product dependent, but includes not saving a deposit, borrowing more, or increased affordability

Cons:

• The knowledge that a family member's home or savings is at risk can be stressful

• Lenders often have more rigorous underwriting for these specialist products so you may find criteria more limiting

For the Helper

Pros:

• Unlike with a gifted deposit, most of these products allow you to hold onto your savings or other assets in the long run

• If you opt for JBSP, you avoid the second home tax surcharge because you’re not named on the property deeds

Cons:

• If the buyer defaults, you are usually legally responsible for the debt or the loss of your security

• Depending on the structure of the mortgage there may be future tax implications to discuss with an accountant

Which lenders offer this type of mortgage?

There are a wide range of banks and building societies, as well as one or two specialist lenders offering a multitude of intergenerational borrowing products. Each has their own criteria and terms, so the most suitable for you will depend on the terms of both the borrower(s) and the helper(s):

It’s a good idea to speak to a mortgage broker with specialist knowledge of arranging family assisted mortgages, particularly if you’re looking for an intermediary-only product, such as the Accord JBSP.

How we can help

At Money Helpdesk, we provide whole-of-market advice to find the perfect family-assisted product for your unique situation. Whether your money is tied up in assets, or you don’t have savings but are looking for another way to help your family, we can recommend the most suitable product and lender for you and your loved ones.

Get started now for a free consultation with a broker who specialises in family mortgages.