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Springboard Mortgages: Are They Right For You?
We all know just how hard it is for people to buy their first house today. Rising rents that make it extremely hard to save up deposits and ever-increasing house prices mean that there are more 18-35 year olds still living with their parents today than at any point in the past century.
While many lenders would like nothing more than to help out with easier access to mortgages, fiscal responsibility and regulation that’s been in place since 2008 means that hands are tied - borrowers must be able to show that they have the financial backing to reliably afford a mortgage, and lenders must mitigate their risk to ensure ongoing financial stability.
For many potential first-time buyers, this means having to go to the older generation and ask for help, but the bank of Mum and Dad has its limits, with many parents unable or unwilling to simply hand over their life savings.
The answer - a springboard mortgage. Our experts at Clifton Private Finance are on hand to explain how this relatively new mortgage product works and just why is growing in popularity.
Compare The Best First Time Buyer Mortgages
What is a Springboard Mortgage?
Springboard mortgages have many names. First introduced by Barclay’s Bank as the Family Springboard Mortgage in 2013, it is also known as a family deposit mortgage, family offset mortgage, family boost mortgage, family assist mortgage, and family guarantor mortgage, each with its own fine nuances that are specific to the lender.
Here at Clifton Private Finance, we cover all of these slightly different structures under the umbrella of springboard mortgages.
The idea behind a springboard mortgage is deceptively simple - it leverages savings that belong to a family member (typically a parent, though it doesn’t have to be) as the deposit for a house that the applicant buys.
The applicant effectively benefits from a 0% mortgage (though they can add their own funds to improve their position) which enables them to buy the home they need without trying desperately to save a significant deposit.
Importantly though, those savings don’t go anywhere. They are merely locked in a specific account for a number of years - usually 3 to 5 years - while the buyer repays their mortgage enough to build up their own equity.
Once this locked term is finished, the savings are unlocked and back in the hands of the family member who kindly provided them.
A springboard mortgage allows a family member to help another with their first house purchase without needing to give away their savings or nervously place significant trust in the buyer that one day they’ll be paid back. The bank or lender acts as a trustworthy third-party middle-man, holding on to the savings while they are needed as a guarantee and returning them at the end of the term.
What Happens if Mortgage Repayments Aren’t Made?
The biggest question that must be answered for any family member looking to support another with a springboard mortgage has to be ‘what happens if it all goes wrong?’. Thankfully, we have the answer - and it’s not as bad as all that.
- If the borrower misses a single payment - The bank will only release the savings when the mortgage is up to date with the equity agreed. In real terms, this means that if a payment is missed and not caught up on then it will delay the release of the savings by a month. It’s annoying but not the end of the world.
- If the borrower misses multiple payments - For most lenders, the threshold for starting to play hardball is three missed payments inside of the last 12 months. At this point, the bank will be making very serious overtones and expecting the borrower to catch up. Note, however, that the bank does not ask the other family member to make a payment at any time - this is not a guarantor mortgage where that would happen, but a separate product that’s designed to avoid pressure on the helping family member.
- If the borrower continues to miss payments - Sadly, if the borrower shows they are unable to pay their mortgage, the lender will move to repossess the property.
- If the property is repossessed - When the property is repossessed, it is sold at auction for as high a price as can be quickly obtained. The lender will be looking to recoup their losses in full (including administrative fees and interest). If the sale of the property manages this without any need to dip into the locked savings, then they will be returned to the family member untouched. If, however, the money raised through the property sale does not cover the lender’s losses, then they will take as much as needed from the savings to make up the difference. Any left over will then be returned.
It can be seen that with a springboard mortgage, the lender is doing as much as they can to protect those savings. Ultimately, however, they are there for a reason and if a repossession occurs, the lender has the right to take them to recoup losses.
Think a Sprinngboard mortgage might be right for you? Book a no-obligation call with one of our advisers to see if we can help.
What Happens to the Savings and When Are They Returned?
The savings are locked in a separate savings account, unable to be touched by either the mortgage borrower or the family member to whom they belong. Happily, while they are in this savings account, they continue to accrue interest at an appropriate rate for a basic savings account.
There are two main different systems that determine when the savings are returned to the kind family member - one based on time, and one based on equity.
Savings Locked for a Term (Time-Based)
The majority of springboard mortgages, including those offered by the high-street banks such as Barclays and Halifax, lock the savings for a set term (usually three or five years) and they will be returned at the end of this term as long as the borrower has met their monthly repayment obligation for the whole time.
If there have been hiccups along the way, with mortgage payments missed, this will have a corresponding knock-on effect with the savings term, such that a month’s payment missed or delayed will add a month onto the time before the savings are released.
The only factor that can delay the return of the funds in a time-based springboard mortgage is the reliable and regular monthly repayment of the mortgage as agreed.
Savings Locked Until Equity is Reached (Equity-Based)
An alternative method offered by some specialist lenders is that the savings represent the deposit value in the property and that this must be reached through the mortgage repayments before they are released.
This is best illustrated with an example:
Equity-based springboard mortgages are advantageous in a strong property market, as the increase in value of the property can accelerate the timeframe by which the savings are released; however, it is important to note that a downturn in property prices can lock the savings for a lot longer.
If Simon’s house had dropped in value to £190,000, his father’s savings would be locked until Simon’s mortgage balance was below £171,000 - meaning he’d have to have paid almost £30,000 off the principle, which could take 7 years or more.
Springboard Mortgage Rates
A springboard mortgage provides an excellent way for a first-time buyer to get help from a family member that’s safe and easily understood, however, it is not without its disadvantages.
A springboard mortgage has higher interest rates than a comparable standard residential mortgage which means that over time it will end up costing more. Mortgages where the borrower has saved their own deposit are considered lower risk by lenders and rates reflect that accordingly.
Higher rates does mean a slightly greater level of monthly repayment, which increases the affordability and stress testing that’s part of any mortgage application. In short, this means that you need to have a better debt-to-income ratio to afford a springboard mortgage than for a traditional mortgage.
Working with Clifton Private Finance is the perfect way to offset this disadvantage. As expert mortgage brokers with established relationships with both high-street banks and specialist springboard mortgage lenders, we can help you by assessing the full UK marketplace of springboard mortgages to achieve the best rates without sacrificing the flexibility you need.
Springboard Mortgages for the Self-Employed
Self-employed mortgage applicants have typically required extensive deposits to secure their first home. With less reliable income (at least on paper), self-employed borrowers often find it harder to present their finances with the same stability as salaried workers and lenders use lower LTV mortgages and increased rates to offset this perceived risk.
The power of a family assisted springboard mortgage alongside two years of documented self-assessment tax returns gives self-employed applicants a far greater level of visible financial security. This can mean not only that a mortgage is possible in the first place, but that buying power increases and rates are lowered. For the self-employed, springboard mortgages represent an excellent way to get that dream first property.
Springboard Mortgages for Bad Credit Applicants
If you have a poor credit history, then a springboard mortgage can be seen as the boost you need to get a mortgage that might otherwise be out of reach. Unfortunately, the more stringent affordability and stress tests that come with a springboard mortgage do work against you.
Lenders will be willing to consider springboard mortgages for people with poor credit, but LTVs on offer will be lower, and rates higher, than for more stable borrowers. Expect to need a larger level of savings assistance from your family members, and potentially even a slightly longer savings-lock term.
It is essential that mortgage repayments are prioritised so that you do not put yourself at risk of repossession and your family’s savings at threat. In doing so, however, you will recover from your poor credit situation, both releasing your family member’s savings back to them untouched and putting yourself in a far better financial situation at the same time. It’s a win-win if responsibly managed.
4 Alternatives to Springboard Mortgages
Springboard mortgages are part of a range of mortgage products that are designed to provide assistance for first-time buyers in today’s difficult property marketplace - but they are not the only product nor the only solution.
You may want to also consider:
Guarantor Mortgages
A guarantor mortgage is one where a family member acts as a guarantor to your mortgage application, providing the bank with a backup person responsible for the debt if you ever miss a mortgage payment. A subset of guarantor mortgages is the equity-based guarantor mortgage which works in a similar way to a springboard mortgage but leverages your family member’s personal home equity rather than savings.
Like a springboard mortgage, an equity-based guarantor mortgage can result in an effective 0% deposit mortgage for the primary applicant (you). The bank ties the mortgage both to your house purchase and the guarantor’s existing property, leveraging the equity they have in their property in lieu of your deposit.
There are some differences between an equity-based guarantor mortgage and a springboard mortgage:
- Savings vs. equity deposit - A springboard mortgage locks actual cash savings for a given term, while an equity-based guarantor mortgage is an agreement leveraged on existing equity in the guarantor’s own property.
- Repayment responsibility - A springboard mortgage never asks for the family member to make a payment should you miss one; an equity-based guarantor mortgage explicitly makes the guarantor obligated to make a payment should you default.
- Guarantor affordability - With a springboard mortgage, your family member is not assessed for affordability. With an equity-based guarantor mortgage, they are effectively a joint applicant and their income and debt is assessed in a similar way to your own.
- Risk - The worst that can happen to your family member with a springboard mortgage is the loss of the their savings should your home be repossessed. An equity-based guarantor mortgage could result in your family member also having their home repossessed to meet the lender’s losses.
Government Backed Deposit Mortgages
Property buyers in the UK may benefit from the government backed Mortgage Guarantee Scheme, which allows lenders to offer 95% LTV mortgages to people looking to buy a home. This means you can secure a mortgage with only a 5% deposit rather than needing a more typical 10-15%. The government backs the loan, lowering the risk for lenders.
Note that this scheme is scheduled to end on the 30th June 2025.
Gifted Deposits
A gifted deposit is one where a family member simply gives you their savings as an obligation-free gift. Because any additional formal loan increases your debt responsibility and significantly affects your mortgage viability, it is important that this is not a loan with any expectation of repayment, but is a true present from one family member to another.
Gifted deposits do come with problems, some very obvious, others quite subtle:
- Your family member cannot ever ask for their money back - Compared to a springboard mortgage where they get their savings back safely (and with interest!) after a few years, it is a very hard ask to get a family member to just give you the money.
- They really cannot ask for it back! - A gifted deposit must come with documentation from the family member that clearly and legally shows they will not ask for its return.
- Fraud regulations mean that the provenance of a gift will be assessed - This means that the family member’s bank account and activity will be looked into to make sure the money has come from a legal and legitimate source and isn’t part of any fraudulent or money laundering activity. For some people, this can feel quite invasive and off-putting.
- Late-life financial gifts may be subject to inheritance tax - If the family member passes away within seven years of presenting the gifted deposit, it may become subject to their estate’s inheritance tax, incurring a bill to HMRC for as much as 40% of its value (2024/25 figures). As an example, a £30,000 gifted deposit could result in an inheritance tax bill of as much as £12,000 a year later.
If you are considering asking a family member to gift you all or part of your deposit, it is best to speak to a specialist mortgage advisor. Our team at Clifton Private Finance can help you navigate the complicated nature of gifted deposits - give us a call today.
A Traditional Deposit-Based Mortgage
Ultimately, cutting back on your expenditure, working hard, and saving up for a deposit does remain an option. Sadly, in today’s economy with high costs of living, this is an impossibility for so many people, however it always remains an alternative to a springboard mortgage.
Getting a Family Springboard Mortgage with Clifton Private Finance
Specialist mortgage help is essential if you want to make the most out of your mortgage, with the lowest possible rates and most flexible terms. With so much to consider, from the nuances of the different types of springboard mortgages offered by different lenders, through to the finer points of dealing with credit scoring, affordability tests, and much more, it really helps to have an expert at your side.
We have established relationships with key players in the UK mortgage marketplace and can open the door for you to get a mortgage that suits your unique circumstances and specific needs.
Your dream home isn’t out of reach! With Clifton Private Finance, a helpful family member, and a springboard mortgage, you can get onto the property ladder safely and securely - and you can do it today! Contact us now.
