Parental Help Mortgage
For a long time parents have helped their offspring get on the housing ladder, but a new mortgage from Lloyds TSB has made such assistance official.
Their new mortgage product called Lend a Hand offers first-time buyers a generous 95% of the property valuation. Such a low deposit of only 5% has been effectively unavailable since the housing crisis started.
Offered at a fixed rate for three years of 4.39%, the catch (or opportunity is, whichever way you look at it) is that the borrowers’ parents deposit a sum of money with Lloyds TSB. The sum required is 20% of the property value and will be lodged in a savings account. Whilst there, it will pay a fixed interest rate of 3.5% and although the parents will retain the ownership of the savings, the bank will have legal charge over the money.
The bank will retain legal charge over the savings until the outstanding mortgage falls below 90% of the property value. This would usually occur with a mixture of monthly payments being made satisfactorily and an increase in property prices.
Once the 90% has been reached, the savings are freed up and the mortgage will operate normally for the three year fixed term, and then the holders would have the opportunity to switch mortgage products, or remortgage.
The arrangement fee for the Lloyds TSB Lend a Hand mortgage is a one-off £995.
Mortgage experts generally welcomed the new mortgage deal, although some did make the obvious point that it would only help those with parents who could afford £20,000 to be locked up in the first place. And if parents have such a some of money, they can always add it as a down payment, although it will not then necessarily making a decent return of 3.5% a year. They also pointed out that the Yorkshire building society also offer a 95% deal, although the interest rate is a lot higher at 6.99%.
On the plus side, it does allow the parents a good chance to get their contribution back, it offers a competitive interest rate and with the deposit, the credit score is not as demanding as a normal 95% mortgage, or even one for 80%.
Guest Article by Neil Camp
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My name is Alan Potts and I'm the Editor of the BUYability web site and Managing Director of BUYability Limited. You can connect with me or keep up to date with new posts on this blog via the following social media sites: 
