FIRST-TIME buyers can now borrow £500,000 with NO deposit at Barclays, as long as a family member contributes 10 per cent of the property purchase price from their own savings.
The banking giant has revealed changes to its Family Springboard mortgage range allowing new homeowners to take out larger mortgages for a longer period of time.
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The deals, which were first introduced six years ago, let homebuyers borrow deposit-free by linking their mortgage to a friend or family member’s savings.
As of yesterday, Barclays upped the fixed rate period of three years to five and extended the term of 25 years to 35.
The fee-free mortgage now allows home buyers to borrow between £5,000 and £500,000. It comes with a fixed rate of 2.95 per cent.
Barclays is also offering a five-year fixed rate of 2.75 per cent if the home buyer has a 5 per cent deposit to put in on top of the 10 per cent savings.
The Sun has asked Barclays what the previous maximum loan limit was, but we haven’t yet heard back so we’ll update this article as soon as we do.
Meanwhile, the savings are locked away in a Barclay’s fixed term savings account for five years as a security for the home loan.
Just be aware that if you miss your mortgage payments, your family’s money is at risk as the bank may hold onto the savings for longer than five years.
How does the mortgage work?
How it works, is that the family member who stumps up the effective deposit sets up a “Helpful Start” savings account with Barclays once the bank has made a mortgage offer.
After the five years, whoever helped you with the funds will be refunded their 10 per cent plus interest.
This rate is set at 1.50 per cent above the Bank of England’s base rate of 0.75 per cent, meaning savers can currently earn 2.25 per cent in interest on their savings.
In comparison, the best buy five-year fixed rate savings account is currently 2.75 per cent from Gatehouse Bank.
The idea is that the homeowner will have paid down enough of their mortgage to be able to remortgage to a lower loan-to-value mortgage once the fixed term is up.
How do you find the best mortgage deals?
IF you have or haven’t got a deposit lined-up to buy a home, shopping around for a mortgage is the same.
Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you’re getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You’ll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents like utility bills, proof of benefits, your last three month’s payslips, passports and bank statement.
And while you might be tempted to get a mortgage without a deposit, they tend to be more expensive than other deals, so you could be better off saving up instead.
You can check out our guide to the best first-time buyer mortgage deals here.
The “no deposit mortgages”, which often means a family member is brought in as a guarantor to get around tough restrictions, used to be really common.
But after the financial crisis 10 years ago, lenders started to withdraw these types of home loans from the market.
One of the risks with these mortgages is that if house prices fall, borrowers can fall into negative equity, which means the current value of your home is less than the amount you have outstanding on your mortgage.
This, in turn, means that if you were to sell their home you would find yourself owing the bank the difference between the value of the mortgage and the value of your home, meaning some may struggle to remortgage.
Yet now, more and more lenders are launching such deals, with Lloyds Bank offering them again as of January this year.
Is it a good deal?
Andrew Hagger, founder of Moneycomms, told The Sun: “Barclays has been offering its ‘Family Springboard Mortgage’ for a number of years now which is quite a neat scheme.
“The positives are that the parents are not giving the funds directly to their kids but using it as a support mechanism – to help them get started whilst still earning interest at a decent rate, plus they’ll get their monies back after 5 years if all goes to plan.
“The helpful start account pays interest at 1.5 per cent above base rate so currently 2.25 per cent which is pretty decent – only a handful of 5 year fixed rate bonds are paying 2.50 per cent or more for example.
“But if the children fail to make repayments, then the parents could be asked to make up any shortfall if things go really wrong.”
Mr Hagger also stressed that the danger with high LTV mortgages is the risk of falling house prices, meaning the borrower would be left with a high LTV balance that they can’t find a lender to take.
This could mean they are forced onto a more expensive standard variable rate (SVR), or they could also fall into negative equity.
Lloyds Bank’s Lend a Hand mortgage is another similar mortgage.
Its rate is higher at 2.94 per cent, but it also comes with a shorter fixed term of just three years.
Again, parents deposit the 10 per cent into a savings account, which currently offers a higher rate of savings interest at 2.50 per cent, and this cash is then returned after three years.
The LLoyds Bank deal comes with a maximum term of 30 years, compared to Barclay’s 35 years.
Those looking for more information should call Barclays on 0345 734 5345 or Lloyds Bank on 0345 122 1607.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
In other mortgage news, Nottingham Building Society is offering home buyers £1,000 to take out a loan.
Meanwhile, new mortgage rules will make it easier to get cheapest home loan deal.
If you could pay an extra £25 a month, you’ll be mortgage free a year earlier.
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