Parent Assisted Scheme
This scheme is designed to allow family members to help first time buyers and also home movers to purchase a property with no deposit, or a personal deposit starting at just 5%, by providing a 10% security deposit held in a special account for 3 years. After 3 years the 10% contribution is released back to the donors, with interest added, and the applicant continues with their mortgage.
Applicants can borrow up to 4.0 times their income, singularly or jointly, or 5.5 times if their income, singularly or jointly, is over £50,000 over a maximum term of 25 years, subject to affordability.
Family members or donors must put 10% of the purchase price into a special account where the deposit monies are held for a period of 3 years from completion of the mortgage subject to a satisfactory mortgage payment history throughout that period.
A legal charge will be registered over this special deposit account before any mortgage monies are released and the deposit account must be frozen for the period required to support the mortgage. While the charge is in place the account is not covered by the Financial Services Compensation scheme.
The family members or donors must obtain Independent legal advice prior to the release of any mortgage funds. The borrower and the donor may have the same solicitor for the independent legal advice subject to the discretion of the firm of solicitors.
This type of scheme is not available for new build properties which can normally be submitted under the Government’s Help to Buy Equity Loan scheme or where the property is to be let out from the outset. This includes properties for the armed forces or if the applicants already own a buy to let property or have a second residential property.
Under this type of scheme you can borrow up to 100% of the value of a property without the need for a deposit subject to the lender’s conditions.
The deposit amount is secured by means of a charge on your parents’ property which must not exceed more than 70% of the value of the property.
This type of mortgage will suit first time buyers who do not have a deposit but whose parents are able to offer a collateral charge as security over their own home to help their children get on to the property ladder.
A minimum income of £20,000 applies to the applicant and the mortgage can be arranged over a maximum of 40 years subject to ending before your normal retirement age. The minimum property value is £100,000.
However the parents’ income is not taken into account when calculating the loan.
A collateral valuation is carried out on the parents’ property and if it is visible from the road, the valuer will carry out a drive-by valuation.