Family Offset Mortgages

Reach The Property Ladder With Family Offset Mortgages

If you are a cash-strapped, would-be, first-time buyer, there is hope for you in the form of family offset mortgages. It's no secret that recent graduates are burdened with debt. University fees, overdrafts and loans mean the average graduate is coming out of education with thousands of pounds of debt. At the same time, property prices are still high and mortgages are scarce, and would-be property owners are finding it difficult to get on the property ladder. The innovative family offset mortgages offer some hope for people in this situation.

Offset mortgages work on the principle that borrowers can offset their savings against their mortgage debt and pay interest only on the overall amount of debt. This can work by linking the two accounts or by combining them into one pot in a current account mortgage. Family offset mortgages are no exception to this rule. The difference is that these loans allow borrowers to link savings accounts owned by family members to offset mortgage accounts.

AdvertSome family offset mortgages have rules about who can own the savings account, preferring these to be relations by birth or adoption. Other family offset mortgages are less rigorous and will allow linked savings accounts to be owned by friends as well.

Family offset mortgages typically work like this: If the borrower has a mortgage of £110,000 and a savings account with £10,000, those two accounts can be linked. The savings accounts of the borrower's parents (£25,000), brother (£5,000) and sister (£10,000) can also be linked to the family offset mortgage. This means the borrower would pay interest only on the debt of £60,000. With family offset mortgages, the savers will lose out on the interest they would have earned, but the borrower will feel the benefit of lower mortgage payments.

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The beauty of family offset mortgages is that the people who own the linked savings accounts still have control of their money. They can draw on it whenever they like, though this will mean that the borrower might pay more interest. Meanwhile the responsibility for repaying the family offset mortgage belongs to the borrower alone. In some families, it's traditional to give a helping hand to family members buying a home. Family offset mortgages offer a no-risk way to do this without being out of pocket.

And there's more good news for the borrower. Like other offset mortgages, family offset mortgages charge interest daily, so that borrowers usually overpay each month. Family offset mortgages also have the flexible features of other mortgages, so payments can be customised to suit borrowers' pockets.

Graduates increasingly have to live at home to save for a deposit and many may not own their own homes until they are in their 30s. Some graduates don't think they'll ever be able to own a home – and why should they? There are almost no first-time buyer mortgages on the market and those that are aimed at the bottom end of the property ladder demand thousands in fees, charges and equity. Family offset mortgages offer some hope. It allows families to help their sons, daughters and grandchildren take their first step on the property ladder.

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