Lloyds bank has recently introduced a mortgage to help first-time buyers titled Lend a Hand a 100% LTV mortgage.
The mortgages under the Lend a Hand scheme are fixed rate, with interest rates set at 2.99%.
Although a deposit from the buyer is not required, a family member will have to put 10% of the loan into a savings account for three years, where it will receive an interest rate of 2.5% APR. Once the three years are over the funds will be released back to the family member with the added interest on top. Lloyds will only own a maximum of £50,000.
From generation to generation young adults aged 18-35 still proclaim that to own their own home is one of the most important life goals for them, yet one of the main barriers that they face is the 10% deposit that is required.
Equally, parents would like to be able to help out their children financially, but worry that they will need the money when they later retire.
Vim Maru, the group director of Lloyds Banking Group, states that Lloyds is committed to helping Britain prosper and lending £30bn to first-time buyers by 2020 is one of the ways that they will do this. Not only will this scheme improve young adults’ chances of getting on the property ladder, but it also rewards loyal customers with a low rate environment.
Whilst this is an excellent product, buyers must be aware that there are other products available such as Barclays Family Springboard. The Family Springboard only has a term of 25 years so the interest rates incurred by this will be much lower. Whereas the Lend a Hand mortgage has a maximum term of 30 years, which may be enticing to many first time buyers who are interested in lowering their monthly repayments. However, they must note that the longer the mortgage term, the more interest they will end up paying.
If you would like to help a family member get onto the property ladder with a mortgage scheme like this one, equity release could help finance the deposit.