The deposit is often the most difficult part financially for First Time Buyers when purchasing a Property. It can take several years to save for a deposit and many First Time Buyers have to seek assistance from family members to be able to take their first step on to the Property ladder.
Lloyds Bank have now introduced a new mortgage to help First Time Buyers purchase a home without the need of a traditional deposit. It is called a Lend a Hand mortgage and is a mortgage for 100% value of the Property. The person purchasing a Property will need a family member to assist them by placing up to 10% of the Property price in a three year fixed rate savings account with Lloyds. The idea is if the person taking out the mortgage defaults on their mortgage payments then Lloyds will be able to take this payment out of the family member’s savings accounts. Once the three year fixed period has finished, the savings can be returned to the family member along with the interest at 2.5%.
The advantage of the new mortgage is that it will assist First Time Buyers to be able to own their first home outright and they will also be able to take advantage of the Stamp Duty Land Tax relief for First Time Buyers.
However, there are some disadvantages with the new mortgage. It cannot be used to purchase new homes, shared equity homes or shared ownership homes. Individuals who do take up the new mortgage will need to consider whether they will be able to afford to continue to pay it if their family member does decide to withdraw the money from the savings account at the end of the three year period. It would be prudent to consider if they will be able to pay the repayments on a remortgage in three years’ time, and it would also benefit you to obtain independent financial advice before taking on the new mortgage.
It should be noted that Barclays Bank also offer a similar mortgage scheme.
It is hoped the introduction of these new mortgage schemes will bring a boost to the Property market by enabling First Time Buyers to purchase their first homes