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Family Mortgage FAQs
Find answers to some of the most frequently asked Family Mortgage questions by borrowers and their families.
You need to think about:
A. How much have you saved for a deposit?
B. How much do you need to borrow?
C. How much can you afford to repay each month?
Download our checklist for Owner Occupier mortgage applications here. This is a list of the minimum documents we require on receipt of your application to help us process your application quickly.
When you are ready to apply for a mortgage we’ll ask for evidence of your income with three months’ payslips. If you are self-employed we’ll need the last two years’ self-assessment calculations with confirmation from HMRC that they have been accepted, or if corrections have been made.
We may also require evidence of some of your regular outgoings if you pay rent and/or a loan payment.
To help us process your application quickly we've produced a checklist for Owner Occupier mortgage applications which highlights the minimum documents we require on receipt of your application.
Where the Family Offset Account option was chosen when the mortgage was taken out, the offset support is removed after 10 years (in some cases it may be longer – please read the question 'Can money be released before the 10 years are up?'). Your monthly repayments are likely to rise at this point as you take responsibility for repaying the whole mortgage. If, due to unforeseen changes in circumstances, you are unable to meet the mortgage payments then it may be necessary for you to sell the property to repay the mortgage. Alternatively it may be possible to remortgage to another lender.
If they continue their mortgage payments and don’t plan on remortgaging to another lender or moving home in the near future, being in negative equity won’t cause an issue. The borrower won’t be at risk of repossession or have to pay extra charges just because they’re in negative equity. As long as they carry on paying their mortgage as agreed, they’ll still be able to switch to a new product with us when their fixed term ends.
However, negative equity can be a problem if the borrower wants to sell their home. Unless they have savings they can use to repay the difference between the value of their home and their mortgage, they may find it difficult to move.
It can also be difficult if the borrower wants to remortgage to another lender, perhaps to a fixed rate or a cheaper deal. Many lenders will not let people with negative equity switch to a new mortgage when their existing one ends. Instead, they will normally be moved onto the lender’s standard variable rate which is generally more expensive.
Your family members providing security may wish to review their Will to take account of the support being provided through the Family Mortgage and simplify administration of their estate. Alternatively, it may be possible to arrange appropriate life insurance to cover this eventuality – please speak to your adviser or contact us to be put in touch with one.
Please ask us about the limitations and exclusions for this cover if you have any questions.
If the Family Offset Account option was chosen when the mortgage was taken out, the offset support is removed after 10 years (in some cases it may be longer - please read the question 'Can money be tied up for more than 10 years?'). Your repayments are likely to rise at this point as you take responsibility for repaying the whole mortgage. If, due to unforeseen changes in circumstances, you are unable to meet the mortgage payments, it may be necessary for you to sell the property to repay the mortgage. Alternatively it may be possible to remortgage to another lender.
If your circumstances change we’ll review your mortgage and look at your current loan to value (LTV), i.e. the amount of money outstanding on your mortgage compared to your total house value.
If you have a joint Family Mortgage with a partner and then separate, there are a few options available to you;
- If you both want stay on the mortgage and both maintain the mortgage payments, you can continue to as per the current agreement until the end of the mortgage term.
- If you want to sell the property, you would need to follow the normal redemption procedures for a Family Mortgage, and any early redemption would be subject to ERCs.
- If you or your partner want to remain in the property and transfer ownership in to your / their sole name, we would need to reassess criteria such as income, expenditure and affordability.
If your circumstances have changed and you’d like further information on what to do, you can contact our friendly Mortgage Service Team on 03330 140146 or email email@example.com
Equity Loans are loans from the Government that are only available for new builds, through a registered builder. You need to have a minimum 5% of the purchase price as a deposit, and the Government will lend you up to 20% of the purchase price. After five years you have to start repaying the Government fees, which increase each year up until you’ve owned the home for 25 years, or you sell your home, whichever is sooner, when you then have to repay the loan to the Government. Loaning you 20% will enable you to access lower mortgage rates, but you will have to factor in repaying the Government a fee each year after five years, and also saving up to repay the loan, or prepare to have it deducted from the house sale when you go on to buy your home. The Government also benefits from any increase in your house price value when you go to repay the loan.
If you live in London the Government has increased the maximum loan amount with the Help to Buy scheme to 40%, if you have a 5% deposit. This means you will need to get a mortgage on the remaining amount up to 55%. The Government loan works in the same way as the 20% loan, and after five years you will be charged a fee for the loan, along with the expectation you will pay back the Government loan percentage when you sell your home, or after 25 years, whichever is sooner.
In comparison, with the Family Mortgage you don’t have to pay any additional fees after five years, and you don’t have to repay any additional money when you want to sell your home, or if you stay there for 25 years. This means that you benefit 100% from any increases in property prices, and you won’t need to factor in having less money for your next house purchase, or saving up to repay after 25 years. You also aren’t restricted to buying a new build through a registered builder; in fact, you can buy the home that suits you best.
Your liability to make up any shortfall is proportionate to the amount of additional security each set of family members have contributed.
Provided the mortgage payments are up to date, after 10 years the charge is released and the money or property is no longer at risk from a shortfall on sale.
You will be required to take independent legal advice before the borrower is committed to the purchase.
Where the Family Offset Account option was chosen when the mortgage was taken out, the offset support is removed after 10 years (in some cases it may be longer – please see this questions below). Payments are likely to rise at this point as the borrower takes responsibility for repaying the whole mortgage. If, due to unforeseen changes in circumstances, the borrower is unable to meet the mortgage payments then it may be necessary for the borrower to sell the property to repay the mortgage. Alternatively it may be possible to remortgage to another lender.
You may wish to review their Will to take account of the support being provided through the Family Mortgage and simplify administration of your estate. Alternatively, it may be possible to arrange appropriate life insurance to cover this eventuality – please speak to your adviser or contact us to be put in touch with one.
1 In a Family Security Account, savings can act as security for the mortgage which will typically bring the interest rate down for the borrower. This rate is likely to be favourable when compared to the interest rate for borrowing 95% of the property value without the additional security. We’ll continue to pay interest on your savings if you have chosen this option.
2 Alternatively, you can choose to reduce the amount on which interest is charged within the mortgage by placing savings in a Family Offset Account. You won’t receive interest, but your money is still working hard for the borrower. The interest that would be paid on your savings cancels out the interest that would be charged on the equivalent part of the mortgage. With mortgage interest likely to be higher than the interest a savings account would have received, you could be passing on a significant benefit.
It may be possible to release money provided purely as security at one of these points if the balance of the mortgage is 75% or less of the value of the borrower’s property.
Where money has been placed in a Family Offset Account, it provides security and reduces the amount of the mortgage on which interest is paid. Again money could be released after a review if the mortgage balance is less than 75% of the value of the borrower’s property.
It may be that both a Family Offset Account and a Family Security Account are being used and in these cases some money could be released depending on the outcome of the loan to value assessment.
Where the Family Offset Account option was chosen, whilst the money will no longer be at risk once the charge over it is released, the return of the money will be deferred until the end of the fixed rate product term applying at the 10 year point.
The precise return date depends on the combination of fixed rate periods that is chosen by the borrower. For example, if a five year fixed rate is followed by a three year fixed rate and then another five year fixed rate, then the money in the Family Offset Account will be available after 13 years.
Please ask us about the limitations and exclusions for this cover if you have any questions.
The Family Building Society was launched with an aim of offering innovative solutions, such as getting on the property ladder with as little as a 5% deposit, without having to borrow more money from family or another scheme. By ‘thinking outside the box’ the Family Building Society looks at the issues facing people today, and provides a different way of doing things.
For more information on who we are and what we do please visit our about us page.
To find out more about our Family Mortgage you can contact our friendly New Business Team.
Download our brochure
Find out more about how the Family Mortgage works and the options available.
The Family Mortgage enquiry form
Complete our simple enquiry form to help us understand your requirements and if the Family Mortgage is right for you.