Who is the mortgage designed for?

First or second time buyers who don’t have a big enough deposit, but have a parent, step parent or grand parent who is able and willing to provide a guarantee secured against their residential property.

This mortgage is known as the Family Guarantee mortgage and is available through us from Aldermore Mortgages.
 

What are the benefits?

• Available up to 100% Loan To Value (LTV) of the purchase price or property valuation (whichever is lower)**
• Guarantors provide a guarantee secured against their residential property – requiring no cash in form of a deposit
• The amount of guarantee is capped, meaning the guarantors liability cannot exceed the agreed amount
• Maximum guarantee period is 10 years, at which point the charge on the guarantors property will be released***
• The guarantee can be repaid at any time, or released when the LTV falls to 75% or lower****

How does the mortgage work?

Example 1

David and Alison want to buy their first house and have found a suitable property valued at £140,000. Both have good jobs and adequate income; however like many young couples starting on the property ladder they don’t have a sizeable deposit.
In fact their savings of several thousand pounds are just enough to cover the purchase and legal costs, plus enough to buy all the essentials required to furnish a first property.

Alison’s parents’ have sizeable savings and have considered gifting a deposit. However, knowing that David and Alison can afford the full mortgage amount, they choose to retain their savings and instead give a guarantee for the amount of loan in excess of 75%.

Their residential property is valued at £270,000 with a modest £62,000 mortgage outstanding, so they have sufficient equity to support the guarantee, which equates to £35,000. The guarantee is secured by a collateral charge on their residential property and they know their liability is capped at the original amount of the guarantee.

The maximum guarantee period will be 10 years, at which point the guarantee will expire (and the charge against the guarantors property will be released) unless demand has been made under the guarantee and moneys remain outstanding, in which case it will expire when outstanding money is paid in full.

Property price/value: £140,000
Mortgage amount: £140,000
Parents (capped) guarantee: £35,000 (secured by a collateral charge on their residential property)

Example 2

Susan wants to buy her first property and has found a flat close to where she works valued at £100,000. Having spent several years repaying her student loan she only has modest savings, which after taking account of the costs of buying the property, leaves enough for a £3,000 deposit. She can afford a £97,000 mortgage to make up the remainder of the purchase price.

Susan’s parents’ aren’t able to gift a deposit, but have a mortgage free property so choose to give a guarantee for the amount of loan in excess of 75%, in this case for £22,000, secured by a collateral charge on their residential property.

Their residential property is valued at £180,000 and they know that their total liability cannot exceed £22,000, equal to just 12% of their residential property value. The maximum guarantee period will be 10 years, at which point the guarantee will expire (and the charge against the guarantors property will be released) unless demand has been made under the guarantee and moneys remain outstanding, in which case it will expire when outstanding money is paid in full.

Property price/value: £100,000 

Mortgage amount: £97,000

Parents (capped) guarantee: £22,000 (secured by a collateral charge on their residential property)

Interested in the Family Guarantee Mortgage?

Book an appointment with one of Mortgage Consultants who will go through the details of the mortgage including a mortgage and insurance assessment, click here to request more details or contact your local office.
 

Legal wording...

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Sequence (UK) Ltd is an appointed representative of Connells Ltd who is authorised and regulated by the Financial Services Authority for the advising and recommending of mortgages and non-investment products. A broker fee may be payable.

*Subject to lender criteria and a guarantee from an immediate family member secured against their residential property up to a maximum of 25% of the mortgage amount. **Subject to affordability and sufficient equity in the guaraantor property.        *** Unless demand has been made under the guarantee and moneys remain outstanding, in which case it will expire when outstanding money is paid in full.  ****Subject to an acceptable re-valuation of the mortgaged property at a cost of 100 and a release of land/collatoral fee of £95.