Many parents in Gloucestershire are keen to help their children get onto the property ladder, but if they don’t have a large lump sum available to hand over, they often believe that there’s nothing they can do to assist.
However, that isn’t actually the case. At TG Sales & Lettings, we often advise clients who are searching for property solutions for their kids, and one of the options we recommend is a family offset mortgage.
Family Offset Mortgages – What Are They?
A family offset mortgage is one of the types of offset mortgage on the market today. All kinds of offset mortgage work by offsetting savings against the home loan to reduce its total amount and, thus, reducing how much interest is paid overall.
There are three key points to note when it comes to family offset mortgages:
- The total capital repayments stay the same, but the amount that interest is charged on, will reduce.
- The linked accounts won’t earn interest.
- A family offset mortgage may not have as competitive an interest rate as a standard mortgage.
Bearing these three points in mind, it’s important to work out the advantages and disadvantages before going for this option.
How Much Do I Need To Have In My Savings Account To Apply For A Family Offset Mortgage?
All lenders have their individual criteria when it comes to applying for a family offset mortgage, but in general, you’ll need around 10% of the property’s purchase price. With some lenders, the levels will be significantly higher. There may also be extra stipulations, for example, a minimum yearly income.
Can I Make A Family Offset Mortgage Application?
If you have sufficient savings, there are some other considerations to keep in mind when determining whether you can make a family offset mortgage application. Approval will depend on your credit history, your debt-to-income ratio, and even the type of property being purchased.
Does Every Lender Offer Family Offset Mortgages?
There are some lenders who offer this type of offset mortgage, but many of the big-name lenders don’t offer these specialised products. Other lenders offer them but call them by a different name! It’s therefore essential to seek professional advice if you’re interested in taking out this kind of mortgage.
Should I Opt For A Family Offset Mortgage?
There are a number of advantages in applying for a family offset mortgage as a way of helping your child buy a property. They include:
- Less interest will be paid overall.
- There is more flexibility so the mortgage duration could be shorter or lower amounts could be paid each month.
- Most family offset mortgages accept overpayments.
- If you’re a higher-rate taxpayer, this mortgage could potentially benefit you.
- Your savings can still be accessed.
On the downside though:
- You’ll receive no interest on your savings.
- The interest rate will likely be higher.
- You will be restricted to only a few lenders.
- The terms may not be especially attractive.
- The LTV ratio may be prohibitive.
- You may not have enough savings to make it worth your while.
With all of this in mind, it’s easy to see why talking to a mortgage professional is so important. However, once you’ve made your decision, or if you need advice about finding a suitable property for your child to help them onto the property ladder in Gloucestershire, don’t hesitate to give our team at TG Sales & Lettings a call on 01452 300822.