We get lots of enquiries from people interested in springboard mortgages and other types of family deposit mortgage, often because they’ve been declined a mortgage or may have a bad credit history.
We have collated everything you need to know about springboard and other family deposit mortgages in this handy guide:
If you are interested in finding out if you would be able to get a family deposit mortgage and want to save time, hassle and money, talk to one of the experts we work with.
Call 0808 189 2301 or make an enquiry and we’ll connect you with a broker experienced in successfully arranging all kinds of family deposit mortgages for customers.
All the brokers we work with are whole-of-market brokers with access to mortgage lenders across the entire UK. The service we offer is free, there’s no obligation and we won’t leave a mark on your credit rating.
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What is a family springboard mortgage?
First thing to note is that springboard mortgages are a specific product offered by some lenders allowing a charge to be taken over savings.
“Family deposit mortgages” are considered by many lenders. They are usually formed of a deposit gift, and restrictions and criteria can vary greatly depending on the lender.
Parents understand the financial difficulties that their children face in today’s property market, so they naturally want to help.
In fact, research conducted by Legal & General, estimated that in 2017, 25% of mortgage transactions were financed with the help of the buyers’ parents (bank of mum and dad). But what if the parents aren’t in a position to gift away thousands of pounds?
That’s where a Family Springboard Mortgage can help.
A springboard mortgage makes buying a property possible, for those parents who cannot afford (or would prefer not) to give their children a lump sum deposit.
How does a springboard mortgage work?
The buyer puts in 5% deposit, and borrows 95% as with a traditional mortgage, however in addition to this, a family member (mum and dad / grandparents / other family member), deposits 10% of the purchase price into a savings account with the lender, who takes a charge over the funds as security in event of default.
Explaining a springboard mortgage with an example:
Family springboard mortgage example
A buyer wants to purchase a property for £200,000, puts up £10,000 deposit (5%), borrows £190,000 (95%), and parents deposit £20,000 (10%) into an account for 5 years (where it still earns an attractive rate of interest).
After the 5 years are up, the lender releases the charge and the funds held in account are free to be moved without penalty, so long as the mortgage payments are up to date.
Could my parents make interest from a springboard mortgage?
When considering the pros and cons of a springboard mortgage it can be helpful to know that the money deposited accumulates interest.
Every lender offers varying interest rates. To make sure you get the right mortgage with the best terms, make an enquiry and one of the specialists we work with can help you understand what sort of mortgage terms and interest rates are available to you.
When would my parent’s money be returned?
The money deposited in savings is kept as security and is used to cover any shortfall if the property were to be repossessed and sold with negative equity.
With most springboard mortgages, after three to five years of punctual payments, parents can release their money and then use it for retirement or to place back in their own savings account or other investment.
What happens if the mortgage payments are missed?
As with all mortgages, repayments must be made on time.
If you are unable to meet your mortgage payments, your parent’s money can be held until the mortgage repayments are up to date.
Some lenders even state that if three payments are missed, the money will be held onto until accounts are up to date and there are no missed payments within a 12 month period.
Therefore a springboard mortgage isn’t a decision to take lightly.
How much deposit would I need?
Most Springboard Mortgage lenders require a 5% deposit, so you’ll need to raise a deposit. This could be through:
- Remortgaging another property
- Sale of other assets
- Personal loan
- Gifted deposit*
*Some lenders will accept a gifted deposit from a close family member. Those gifting the money must understand that they have no share or interest in the property and will not get their money back. Most lenders require a letter signed to that effect.
Can I get a no deposit family springboard mortgage?
Yes. There are now a handful of specialist lenders offering a 0% deposit, for the first time since the credit crunch, and the advisors we work with know who they are and regularly arrange these mortgages.
This is great news for those without deposits, but fortunate enough to have a parent or close relative in a position to deposit money as security against the loan.
It can often mean first-time buyers are able to purchase a property quicker and avoid living at home for years to come, as they try to save a large deposit.
A typical Family Springboard Mortgage example can be seen below. Please note that this is an example and not representative of all lenders.
(Deposit amount based on lenders required deposit percentage and a 10% security deposit provided by parents.)
|Property Price||10% Security Deposit||Deposit Percentage||Deposit amount (GBP)||Mortgage Amount (GBP)|
How much could I borrow on a springboard mortgage?
Most lenders calculate affordability using a more complex model these days, but in general will cap loans to a multiple of your earnings. Most will cap at 4x annual income (so someone earning £25k would not be able to borrow more than £100k), some will offer up to 5x income, and a handful even up to 6x income in the right circumstances.
When it comes to springboard mortgages, there are far fewer lenders in the market, and as such, the range of options and income multiples can be limited.
What also plays a part is the type of income you earn, and the amount of other financial commitments you have. The more variable/less reliable the income, the fewer the lenders, and the more debt you have, the less a lender will be prepared to offer you.
An example of how much a homeowner can borrow based on different income multiples can be seen below:
|Income||Income Multiples||Loan amount|
|£25,000||X 4.0 income||£100,000|
|£50,000||X 4.0 income||£200,000|
|Income||Income Multiples||Loan amount|
|£51,000||X 5.5 income||£280,500|
|£70,000||X 5.5 income||£385,000|
Most lenders only offer a springboard mortgage on properties up to the value of £500,000.
How does income type impact springboard mortgage approvals?
There are many different ways to earn a living and lenders look upon each one differently. All things being equal, the usual criteria regarding affordability and credit history will apply as usual.
For employees it’s all relatively straightforward, based on salary plus any additional allowances or bonus/commissions.
Any proof required can be done through payslips, employment contracts and recent bank statements.
Most lenders require that you have been in a new position for at least three months, while a few may accept a shorter employment period.
If you’re self-employed your earnings are based on the profits from your business. For affordability purposes, a mortgage lender will want to see evidence of a solid trading record over a period of time which clarifies the information on the application.
There are different types (or classifications) of self-employed, namely:
- Sole trader / partnership.
- Contractor / Freelance.
- Director of limited company.
Mortgage lenders will treat these three classifications differently when assessing affordability.
If you’re a sole trader or in a partnership, lenders will focus on the net profit you have drawn from the business and most will then want to see a trading record over a period of 3 years (some will accept 2 and a few will consider 12 months) to formulate an average.
So, for example, if your net profit over the last three years equated to £30,000 then that figure is used as part of the affordability assessment.
Ltd company directors and contractors
For a director of a limited company most lenders will focus on both salary drawn and any dividends paid. If you’re a contractor, lenders will look at your daily rate, multiply this by five days a week and then use a number of working weeks (say, 49 to account for any holidays) to assess your annual earnings.
For example if your daily rate was £250 per day over a 49 week trading year, the equation would be: £250 x 5 x 49 = £61,250 annual equivalent earnings.
Regardless of how you are classified for self-employed purposes, the length of time you have been trading will also be scrutinised as part of a mortgage lender’s affordability assessment.
How long do I need to have been self-employed for?
Most lenders will want to see a trading track record of at least 3 years, some will accept 2 years, a few will accept only a 12 month track record and a handful can even consider less than 12 months in the right circumstances.
If you’re self-employed and wish to receive further advice in this area get in touch and we can arrange for a specialist to speak to you directly.
What other forms of income are acceptable for mortgage affordability criteria?
Not all income is derived through earnings (whether employed or self-employed). There are different types of unearned income which may also be put forward to be assessed for mortgage affordability purposes, namely:
- Benefits income.
- Retirement income.
- Rental income.
- Investment income.
- Trust income.
- Maintenance payments.
How these income sources are assessed depends on the particular mortgage affordability criteria of a lender as they will all treat these earnings differently.
For example, most lenders will accept at least 50% of all state benefits declared on an application, some will consider 100% with an award letter provided as supporting evidence.
If you have income from any of the above sources and want to find out what mortgage you can afford, call 0808 189 2301 for a free, no obligation chat with one of our friendly expert advisors.
Is there a springboard mortgage calculator I can use?
Many lenders use a family springboard mortgage calculator to determine how much an applicant can borrow; however each lender is different and as well as using your income, they may also use other affordability factors to calculate the amount.
Therefore, with every lender, you may receive a different estimation on how much you could borrow, so bear this in mind if you use one and feel unhappy with the quote you receive.
Call 0808 189 2301 or make an enquiry and one of the advisors we work with will be happy to answer your questions and find you accurate information about how much you could borrow using a springboard mortgage.
Why take a springboard mortgage?
Potential for a better deal
The benefit of a springboard mortgage is that they usually allow you to purchase at a more attractive rate than for a traditional 95% deal, because the risk to the lender is in effect, 85% of the property value.
Family deposit mortgage help without gifting cash
This option can appeal to parents as it provides the peace of mind of knowing that the money deposited into the account will be returned and that they are able to help their children without gifting cash they’d rather not part with!
Can I get a family springboard mortgage with bad credit?
Bad credit or ‘adverse credit’ is a term used to describe a less-than-perfect record of repaying credit commitments. If you have adverse credit it could mean that you have negative payment information on your credit report.
We’ve spoken to many potential homeowners who have worried that adverse credit will affect their chances of being approved for a springboard mortgage.
Fortunately, the brokers we work with are experts when it comes to finding mortgages for people with bad credit. For more information on how bad credit can affect your chances of getting a mortgage, visit our page on bad credit mortgages.
If adverse credit is something you’re worried about, it can be really helpful to check your credit history to establish any financial issues you may have on your report. Your advisor will want to see this before making any applications, as they can see what lenders look at and match you with the best ones most likely to accept you.
If you haven’t already signed up, you can access your free trial credit reports here:
The best approach is to get help from someone knowledgeable about adverse credit and springboard mortgages. The advisors we work with are experts in this area and will be able to steer you in the right direction and help you get the best possible deal.
Call 0808 189 2301 or make an enquiry for a free, no obligation chat.
Frequently asked questions about springboard mortgages
We understand how overwhelming mortgages can be, so we’ve listed a few of the other most frequently asked questions below in order to help you…
Could more than one person help with the springboard deposit?
Yes that is possible. They would need to set up a separate account, with separate security deposits for each family springboard mortgage.
Can you take out money from the account in case of an emergency?
No. The funds will be unavailable until the end of the three-year pre-agreed tie in term (or longer if your mortgage repayments are late or overdue).
Would I have complete ownership of the property with a springboard mortgage?
Yes. The property deeds would be in your name and the property would be owned by you.
Is a springboard mortgage just for first time buyers?
No. This type of mortgage is available for home movers too.
How long would the mortgage term be for?
Typically a Springboard Mortgage is payable over 25 years.
Can I get a Springboard Mortgage to buy a new build?
No. Lenders won’t consider family deposit mortgage applications on new build properties.
Who provides springboard mortgages?
There are a select number of lenders who are now offering this product. These include:
- Barclays Springboard Mortgage
- Halifax Springboard Mortgage
- Post Office Family Link Mortgage
- Family Building Society Family Mortgage
- Nationwide Family Deposit Mortgage
There are a few more, but it’s important to bear in mind that the family springboard mortgage terms and conditions vary considerably from lender to lender.
If you approach these lenders directly, you’ll be dealing with their own in-house broker, who works for the lender, not you. They often do a hard search of your credit, which will leave marks on your credit history.
We’d recommend that you use one of the advisors we work with. They are experts when it comes to finding the best family deposit mortgage for your circumstances, even if you have bad credit and they won’t leave footprints on your credit rating.
Should I get advice before applying?
Yes! We always recommend gaining advice from one of the expert mortgage advisors we work with before applying for a springboard mortgage as it’s a huge commitment for all parties involved. In fact, some lenders will stipulate that the person making the savings deposit seeks independent legal advice before proceeding.
The right advice can really put your mind at ease, especially at a time which could feel stressful and daunting. It can also save you a lot of time as a mortgage advisor can dedicate their time to research the best lenders based on your circumstances and can assist you through the entire process of applying for a springboard mortgage.
A good broker can also spend time going through the varying family deposit mortgage rates and assessing various reviews, in order to ensure you find a lender who is right for you.
The advisors we work with are experts in this area and will be more than happy to help you with the right advice.
Speak to an expert about family deposit mortgages
If you have any questions and want to speak to an expert for the right advice, call 0808 189 2301 or make an enquiry.
We’ll match you with one of the experts we work with, ensuring that they have experience of arranging family deposit mortgages for other happy customers.
The service we offer is free, there’s no obligation and we don’t leave a mark on your credit score.