Post Office launches a ‘no deposit’ mortgage where buyers take out a loan on parents home
First-time buyers will be able to secure a 10 per cent loan against their mum and dad's property, which they will then have to pay back over five years
WANNABE first-time buyers struggling to get the money together for their first home will now be able to get a mortgage - without having to save for a deposit.
The Post Office has today launched two new deals for Brits wanting - but finding it difficult - to get on the property ladder for the first time.
Its "Family Link" mortgage will see borrowers take out a 90 per cent loan to value mortgage, with the 10 per cent deposit secured against mum and dad's home - as long as they're already mortgage free.
Rates start at 4.89 per cent for a five-year fixed deal.
Buyers will then make two separate repayments for the first five years of the deal - their own mortgage payments and one towards the "assistor's mortgage" which is interest free.
For example, if you took out a mortgage worth £121,500 over 30 years at 4.89 per cent, your monthly repayments for the first five years would be £644 a month, including the deposit loan.
How to get help buying a house
THERE are several government schemes available to help you get on the housing ladder.
- Help to Buy loan: This scheme is for those who have a 5 per cent deposit, and is only available on new-build properties that are worth less than £600,000. The government lends you up to 20 per cent of the property value (interest-free for the first five years) which gives you access to cheaper mortgages. You will need to pay this back at the end of the mortgage or when you sell.
- Starter Homes: First-time buyers under the age of 40 can access this new scheme. You’ll get a 20 per cent discount on the market value of the property (new-build only) but you cannot sell or let the property for five years after you buy it.
- Shared ownership: This scheme is available to non-homeowners who earn £80,000 a year or less (£90,000 in London). People can buy a share of a home from a housing association and continue to rent the remainder. Buyers will need a ten per cent deposit as well as money to cover stamp duty and other fees. You’ll also need to find a mortgage lender that is willing to lend on shared ownership properties.
Once the loan is paid off after five years, your payment will drop to £619 a month - a reduction of £25.
But be warned - if you do fall behind on your repayments both you and your family's home could be at risk of repossession.
Its First Start deal will let borrowers apply for a mortgage with a close relative - parents or step-parents - to help them get a larger loan.
The two incomes will be taken into account when the Post Office decides on how much it will lend to you.
The deal's rates start at 2.09 per cent for a three-year fix, with mortgages available to those with 5, 10, 15 and 25 per cent deposits.
According to the Post Office, both mortgages will help parents who want to support their kids get on the property ladder - without having to tie up their own savings.
A typical young first-time buyer has £3,359 in savings, it found.
But with the average deposit needed to buy their first home, now standing at an eye-watering £50,000, the dream of home ownership seems to becoming more a nightmare.
More on money
Owen Woodley, chief executive of financial services at the Post Office said: "Buying a property has always been a big commitment but trends in the current market and the challenges these present to buyers are all things that we know families want to tackle together.
"We have spent a lot of time talking to first-time buyers and their families and we know that parents want to do all they can for their children.
"But, 41 per cent can’t provide direct financial support, highlighting a need for mortgages that allow families to support each other without having to part with savings."
Mortgage expert with L&C David Hollingworth told The Sun that the new deals were an interesting way of helping first-time buyers get on the property ladder.
He said: "Family Link is looking to address the problem of first-time buyers raising a deposit.
"We've seen options like Barclays Family Springboard but this uses equity in the parental home to address it.
"The borrower will need to pay off the deposit element over the first five years but the upside to that is that it doesn't attract interest.
"Rates will look high compared with standard 90 per cent mortgages but this is clearly a different solution hoping to offer first-time buyers an alternative solution."
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