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Deposit-Free Mortgages Makes A Comeback

Posted by bonnix on June 7, 2016
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First time home buyers will be excited to know that the 100% mortgages are set to finally return in the market later this year. It could be a remarkable sign that constraints on mortgages will be lessened.

Deposit-free mortgage will provide an additional boost for first time property buyers to initiate their first steps on the housing ladder!

These “deposit-free” mortgages, offered exclusively by Barclays, are called the Family Springboard mortgages and it requires a “helper provision” of 10 percent of the actual purchase price, stressing the important role that the Bank of Mum and Dad continues to take part of in the market.

Nonetheless, it is still wise to fully understand that these new mortgage offers still requires a security behind them, so differ from the 100% mortgages on offer before the much hated credit crunch occurs. The “springboard” aspect of these offers plays a vital role, and the need for a security behind these products is something that has been neglected by the press.

The helper, who would usually be either or both the parents of the borrower, should deposit 10 percent of the entire purchase value in a Barclays account. Subsequently after three years, if the mortgage payments have been maintained up to date, the money will then be returned to the specific ‘helper’ who paid the 10%.

A specific survey from late 2015 indicated that almost half of prospective home buyers would welcome a return to the so called ‘deposit-free’ mortgages.

Firm and demanding borrowing conditions, as well as extremely high property prices have meant that most first time home buyers needed to save considerable amount of money just to have a substantial deposit, so as to purchase their first home.

For some people, the end of the deposit-free mortgages after the credit crunch, involved having to reside at home or stay in a crammed, shared flat for years before they could finally enter the property market.

By relaunching the 100% mortgage offers, lenders can now assess their borrowers solely on their current incomes and future earning potentials, although some assistance from the ‘Bank of Mum and Dad’ will most likely be needed. It will be very interesting to see if others follow Barclays’ lead on this scheme.