FAMILY STEP MORTGAGE. Lending Solutions from the Marsden

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1 Lending Solutions from the Marsden

2 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

3 What does the market look like? Growing number of young people living at home or 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 monthly payments manageable. Bank of Mum and Dad is one of the top 10 lenders in the UK as parents look to help their children onto the property ladder 218,255 Is the average UK property price leaving borrowers needing to raise a minimum of 10,912 for a 95% mortgage1 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 ² Council of Mortgage Lenders (2015) The challenge for first time buyers 3

4 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? 90-95% Mortgages a higher LTV with a deposit saved Check out our 95% mortgage range to find out more about options for those. Continued rental/ living with parents to raise deposits alongside raising property prices Getting support from family members to make the step onto the property ladder 4

5 Family Step Mortgage Our product range is competitive offering a range of: Fixed and discount options available for 3 year product terms. No higher lending charge No credit scoring Features Minimum property value 100,000 Maximum loan size 350,000 No borrowing deposit required 10% overpayments Loan advance up to 100% LTV of purchase price 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

6 Who can apply? How do you know if your client is eligible for the Family Step product? For first time or home movers This is not an offset mortgage Sole or joint applicants allowed Minimum age 21 Up to 100% mortgage Property in England or Wales Affordability evidence to support monthly payments No credit scoring No maximum age This is not an offset mortgage Savings support you will need to invest your support in a family step savings account (interest will be paid on your savings) Property support your property will need to be mortgage free You will need to get independent legal advice as part of the process 6

7 How does it work? Here s a snapshot of how our Family Step mortgage works for you, your clients and their family supporter. 0 deposit available 0 deposit (if they have some, that s fine too!) 20 % savings charge open a Family Step Savings account for up to 20% of the property purchase price. 20 % property charge or secure up to 20% of the loan using their property price. % 100 mortgage the borrower gets up to 100% mortgage and has full ownership of the property at a lower rate of interest the security of property or savings provided by the family members can secure up to 100% mortgage. Dependent on the mortgage loan to value, this is either released after 10 years guaranteed or when the mortgage is reduced to 80% LTV i Keep in mind After initial product term the borrower can choose to have the property re-valued which may release the charge. 7

8 What s the process look like? How would you advise your client on a Family Step mortgage process? 8

9 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

10 The couple approached a mortgage broker to find out more about the options available to them Broker said: There were options available for the young couple but many saw the requirement of an upfront deposit which the couple were struggling to raise given they needed savings for solicitors, property furnishing and then a large deposit to find a house in driving distance of their job in the city. We found the family step product range as a solution as Andy s parent s had their retirement savings earning interest in an account and were happy to support with the 20% charge on savings. We spoke to the Marsden to find out more. We said: The couple were interested in our 3 year discount product over a repayment term of 35 years resulting in their monthly repayment being 785 per month which is less than the rent they re currently paying. We could see their income more than covered the bills and they are committed to monthly outgoings already so affordability was not a problem. Andy s parents opened a Family Step Savings Account and earned interest on their 44,000 whilst Andy and Nicola got the home they wanted. 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

11 How would you place it?... Meet Laura and Simon Property worth 130,000 Couple live at home with their parents, saving for a deposit. Have 5% deposit saved currently Laura s parents own their property mortgage free, valued at 150,000 and have agreed to use their property as security to help the couple buy their first home. Broker said: Both Simon and Laura live at home with their parents and are saving towards a deposit to buy their own home. They have seen a property they would like to purchase for 130,000 and although they have saved a 5% deposit they would ideally like to put a larger deposit down to take advantage of lower rates and keep their monthly mortgage payments lower. Laura s parents own their property mortgage free, valued at 150,000, and have agreed to use their property as security to help Simon and Laura buy their first home. As Simon and Laura already have a 5% deposit the security required is 15%, 19,500. This will mean that Simon and Laura will have a mortgage of 95%, 123,500, however, they will take advantage of the family step mortgage rates. We said: Simon and Laura have a joint income of 35,000 and their mortgage, based on the Society s 2.69% 3 year fixed rate would cost per month over a 35 year term which they feel is easily affordable on their income. As the loan to value at the outset of the loan is 95% the charge on Laura s parents property is guaranteed to be released after ten years or sooner if the LTV reduced to 80%. 11

12 GET IN TOUCH Any questions? Get in touch Marsden Intermediary Team t: * e: 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: 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/