If you’re a first time buyer looking to make that exciting first purchase, then there is a good chance you may have heard of the ‘family boost mortgage’; but what is it?
The Family Boost Mortgage is a branded product from mortgage lender, Halifax. It’s designed to help first time buyers get on the housing ladder but also comes with a host of benefits that standard mortgage products do not.
This guide will look to provide a clear definition as to what a family boost mortgage is, provide some useful insights and give you all the information you need to make a decision on whether it’s the right mortgage product for you.
The Family Boost Mortgage will certainly be extremely appealing to young and first time buyers as, unlike traditional mortgage products, the borrower doesn’t need to stump up a deposit for the purchase. Instead, it works based on a gifted deposit format.
Traditionally, when looking to get a mortgage, the buyer will look to provide a minimum deposit of 5% of the property value. For example; if the property value was £100,000; you’d provide a deposit of at least £5,000. However, most lenders prefer buyers to provide at least a 10% deposit. This will vary from lender to lender so it’s worth speaking to an experienced mortgage broker for expert advice.
With the Family Boost Mortgage, there is no deposit needed. So how does it work?
Instead of providing a traditional deposit, the buyer’s family puts 10% of the agreed property purchase price into a 3 year fixed term savings account.
There are no surprises here. Despite your family helping you out with the initial deposit, you will still own the property and own the legal rights and you will still be responsible for making monthly payments against your agreed mortgage.
Once you have been approved for a Family Boost Mortgage and the contracts have been agreed and signed with the lender your mortgage payments will stay the same.
You’ll be on a standard 3-year fixed rate mortgage, which is a fairly common length for the majority of first time buyers as it makes sure that monthly repayments are kept consistent over a specific period.
The savings that start to accumulate in the savings account created during application will start to generate interest over time, just like a normal savings account, when the 3-year fixed term ends. Once the 3-years are up, your family will receive their initial 10% of the property purchase price investment back, with interest on the basis that regular mortgage repayments have been made with no late monthly payments.
If you ever feel you cannot make a mortgage repayment, you should speak to your lender as soon as possible as they may be able to provide support in the form of payment holidays or provide an alternative solution in order to assist with payments going forward. If you ever become in financial difficulty, you should look to get financial advice to avoid missing repayments.
If you’re unsure of how much your monthly payments will be, you can use our mortgage calculator to get an estimated monthly repayment.
The Family Boost mortgage is a fantastic product for young couples and first time buyers. However, it does have its limitations and there are eligibility criteria that need to be met.
If you’re looking to purchase a new build property on the housing market or a home that is included within an affordable housing scheme such as Shared Ownership, I’m afraid that you will not be able to use a Family Boost Mortgage product.
A full list of housing schemes that you cannot use the Family Boost Mortgage include:
There are a number of great benefits to the Family Boost Mortgage for both the buyer and the family members looking to help out their loved ones.
The obvious bonus of this product is that the buyer doesn’t need to provide the mortgage deposit, and they will legally own the property upon completion. However, when buying a property with little or no mortgage deposit you should consider how that may impact you in the future as there will naturally be little to no equity and you could even end up in a situation with negative equity. This means that you owe more against the mortgage than what the property is actually worth.
As well as the buyers, there are a lot of good reasons for family members to help.
By agreeing to assist with their first property purchase via a Family Boost Mortgage, you’ll:
Yes. Although the idea of not providing an initial deposit for your purchase can seem appealing, it does mean that there is an increased risk of negative equity. This means that you own more money against your mortgage than what the property is worth.
To be eligible for a Family Boost Mortgage; you or your family must have a Halifax Reward or Ultimate Reward Current Account before starting your application. You will also need to be a first time buyer that is currently living in England or Wales. If you’re living in Scotland or Ireland, you won’t be eligible.
Yes. You will not be able to borrow more than £500,000.
If you’re a first time buyer looking to purchase your first property and get on the property ladder via the Family Boost Mortgage, speak to one of our first time buyer mortgage experts who’ll be happy to answer any questions you have and get your application under way with expert mortgage advice.
Alternatively, you can call a member of the team directly and get your mortgage application underway on 0800 32 88 680.
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