FAMILY STEP MORTGAGE Lending Solutions from the Marsden
Family Step Mortgages Our Family Step mortgage offers an opportunity to reduce the time clients spend in rented accommodation or living at home, saving for a deposit. Who may be looking for a family step mortgage? • First Time Buyers who have no deposit or have just a little saved in the pot. • Clients looking for a competitive mortgage range. • Clients who have family members with savings or a property (with the mortgage paid off) who are willing to help. • Clients looking for a flexible way to purchase their next or first home. 2
FAMILY STEP MORTGAGE What does the market look like? • Growing number of young people living at home or £218,255 struggling to pay expensive rent whilst saving to get a place of their own. • Average property price of £218,255 sees first time buyers needing to save a large deposit to keep their Is the average UK property price monthly payments manageable. leaving borrowers needing to • “Bank of Mum and Dad” is one of the top 10 lenders in raise a minimum of £10,912 for the UK as parents look to help their children onto the property ladder a 95% mortgage 1 What options are available to help them make the first step? By 2020, only 25% of 30 year olds will own their own home ¹‘HM Land Registry UK Price Index (HPI) for January 2017 3 ²‘Council of Mortgage Lenders (2015) The challenge for first time buyers
FAMILY STEP MORTGAGE What options are available for First Time Buyers The appetite for first time buyers is growing but how feasible is it and what are the options available? Getting support from family 90-95% Mortgages Continued rental/ living members to make the a higher LTV with a with parents to raise step onto the deposit saved… deposits alongside property ladder Check out our 95% raising property prices mortgage range to find out more about options for those. 4
FAMILY STEP MORTGAGE Features Family Step Mortgage Our product range is competitive offering a range of: • Minimum property value £100,000 • Maximum loan size £350,000 • Fixed and discount options available for 3 year • No borrowing deposit required product terms. • 10% overpayments • No higher lending charge • Loan advance up to 100% LTV of purchase price • No credit scoring which is supported by a 20% security of family’s property or savings. • Release of security subject to Terms and Conditions. Eligibility • Borrowers age 21+ • Permanent employment • Not available for new build housing or flats • Independent legal advice required (family supporter) • Available for clients with a small deposit or none at all but have support available from family members to put a charge on their property or savings. 5
FAMILY STEP MORTGAGE Who can apply? How do you know if your client is eligible for the Family Step product? For first time or home movers No maximum age This is not an offset mortgage This is not an offset mortgage Sole or joint applicants allowed Savings support – you will need to invest Minimum age 21 your support in a family step savings account Up to 100% mortgage (interest will be paid on your savings) Property in England or Wales Property support – your property will need to Affordability evidence to support be mortgage free monthly payments You will need to get independent legal No credit scoring advice as part of the process 6
FAMILY STEP MORTGAGE How does it work? Here’s a snapshot of how our Family Step mortgage works for you, your clients and their family supporter. 100 % £0 mortgage deposit available the borrower gets up to 100% £0 deposit (if they mortgage and has full ownership of have some, the property at a lower rate that’s fine too!) of interest 20 % savings charge i open a Family Step the security of property or savings Savings account for up provided by the family members can to 20% of the property secure up to 100% mortgage. purchase price. Dependent on the mortgage Keep in mind… loan to value, this is either released 20 % After initial product term the borrower after 10 years guaranteed or when the can choose to have the property mortgage is reduced to 80% LTV re-valued which may release the property charge charge. or secure up to 20% of the loan using their property price. 7
FAMILY STEP MORTGAGE What’s the process look like? How would you advise your client on a Family Step mortgage process? 8
FAMILY STEP MORTGAGE Picture This… Nicola and Andy graduated from University in 2015 and secured full time employment earning £32,300 and £26,000 respectively. They have been living in a rental property in Manchester since 2016 paying £900 a month in rent. Nicola and Andy would love to own their own home and feel that a mortgage is affordable as they have a proven track record of maintaining rental payments, however, due to living in rented accommodation they have been unable to save a deposit. 9
FAMILY STEP MORTGAGE The couple approached a mortgage broker to find out more about the options available to them… We said: Broker said: The couple were interested in our 3 year discount product There were options available for the young couple but many over a repayment term of 35 years resulting in their monthly saw the requirement of an upfront deposit which the couple repayment being £785 per month which is less than the rent were struggling to raise given they needed savings for they’re currently paying. solicitors, property furnishing and then a large deposit to find a house in driving distance of their job in the city. We could see their income more than covered the bills and they are committed to monthly outgoings already so We found the family step product range as a solution as Andy’s affordability was not a problem. Andy’s parents opened a parent’s had their retirement savings earning interest in an Family Step Savings Account and earned interest on their account and were happy to support with the 20% charge on £44,000 whilst Andy and Nicola got the home they wanted. savings. We spoke to the Marsden to find out more…. Andy and Nicola got their first step onto the property ladder and planned to make use of the 10% overpayments with the extra £115 per month they’re saving from their monthly rent in order to free up Andy’s parents savings when they approach the end of their term in three years. 10
FAMILY STEP MORTGAGE How would you place it?... Meet Laura and Simon • Property worth £130,000 • Have 5% deposit saved currently • Couple live at home with their parents, • Laura’s parents own their property mortgage free, valued at £150,000 saving for a deposit. and have agreed to use their property as security to help the couple buy their first home. Broker said: We said: Both Simon and Laura live at home with their parents and are saving Simon and Laura have a joint income of towards a deposit to buy their own home. They have seen a property £35,000 and their mortgage, based on the they would like to purchase for £130,000 and although they have saved Society’s 2.69% 3 year fixed rate would cost a 5% deposit they would ideally like to put a larger deposit down to take £454.18 per month over a 35 year term advantage of lower rates and keep their monthly mortgage payments which they feel is easily affordable on their lower. income. Laura’s parents own their property mortgage free, valued at £150,000, As the loan to value at the outset of the and have agreed to use their property as security to help Simon and loan is 95% the charge on Laura’s parents Laura buy their first home. As Simon and Laura already have a 5% property is guaranteed to be released after deposit the security required is 15%, £19,500. This will mean that Simon ten years or sooner if the LTV reduced to and Laura will have a mortgage of 95%, £123,500, however, they will 80%. take advantage of the family step mortgage rates. 11
GET IN TOUCH Any questions? Get in touch… Marsden Intermediary Team t: 01282 440583* e: intermediaries@themarsden.co.uk FOR INTERMEDIARY PROFESSIONALS ONLY Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in the Financial Services Register under no: 206050. Marsden Building Society is a member of the Building Societies Association, the Financial Services Compensation Scheme and the Financial Ombudsman Service. Principal Office 6-20 Russell Street Nelson Lancashire BB9 7NJ. *Calls will be recorded and may be monitored. Lines open 9:00- 5:00 Monday to Friday and 9:00 to 12 noon on Saturday Information accurate as of 18/07/2018 12
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