Family Springboard Mortgage

[tieresias]

My kids are now in their twenties and getting to the age where they are wanting to buy their own homes and, in the case of the oldest in particular, dropping hints to the point of nagging that I should give or at least lend him the money for a deposit. I don't want to give it to him and, if I lend it, I have no idea of how, when or even if I would ever be re-paid in my lifetime.

So, it was interesting to stumble across Barclays Family Springboard Mortgage:
http://www.barclays.co.uk/mortgages/fam ... d-mortgage

Essentially, I would deposit 10% of the purchase price in a three year fixed term savings account and get the money back, with interest, at the end of the term and he (with his fiancée) would get a mortgage of up to 100% of the purchase price.

The savings interest rate on offer is 1.75%, which is twice as high as any other Barclays savings account I can find and seems pretty competitive with the rest of the three year fixed rate market.

DAK of similar offerings from the other banks?

Paul

[Lootman]

The problem, at least in the South of England, is that a 10% deposit doesn't really come close to getting a twenty-something child into a decent house. Not only would the average "Millennial" not be able to afford a 90% mortgage but the rates are so much more attractive if the down payment is more.

I wrestled with this "shall I lend them the money or give them the money" question for a good while, also talking to my accountant and my solicitor about this, to ensure there were no adverse consequences to whatever idea I cooked up.

And in the end I just gave them the money. Partly because I don't want to pay tax on any interest, paid or imputed. And partly for inheritance tax planning purposes.

And by giving them enough to be able to get a 60% to 70% mortgage, they got better income multiples and lower interest rates. As well as a bigger place enabling them to rent out rooms.

I realise that doesn't answer your specific question but I thought you might be interested in the thought processes of someone in a similar position.

[tieresias]

Thank you Lootman.

I think I am younger and less wealthy than you, so, while I've been through similar thought processes, I don't want to give my children the money until I'm in my mid-sixties, a decade away, or sure I will not benefit from it myself, as well as the basic principle that they should do it for themselves, as I, and I expect most of us, had to.

But this Barclays scheme does not use the money I would put in as a deposit. The mortgage given would be up to 100% LTV. As far as I can see, the only financial risk to my money would be if they defaulted on repayments, Barclays repossessed the house and then sold it for less than the value of the outstanding mortgage loan. The difference would be taken from my savings. So, it's kind of like a guarantee but not of repayments. There is a further time-related risk in that if they miss a few payments, the term of my loan could be extended.