N&P's scheme will allow first time buyers, with the backing of their parents get a foot on the property ladder.
Due to the rapid growth in house prices over the past few years, many people have been prevented from buying their first home of their own. The main issue facing them is simply affordability. Many first-time buyers do not earn enough to enable them to borrow enough money to buy their own home.
Gary Lacey, group product manager for N&P, said: “N&P recognises the obstacles facing first time homebuyers and has come up with a solution that should help at least some of those who are looking to buy their own property. The Lend A Hand scheme, to be launched on 22nd August, is based around the concept of a potential first-time homebuyer enlisting the help of a parent to assist them in taking out a mortgage.
“In essence, the first-time homebuyer (or ‘child’) and the parent become joint applicants on the mortgage and are both responsible for the mortgage debt. Whilst the ‘child’ must be able to support a minimum of 75% of the required loan, based on N&P’s affordability criteria, the parent’s income can be used to cover the remaining loan amount required. Importantly, to avoid capital gains tax implications, the parent is not named on the legal title of the property.
“Whilst there are a very small number of mortgages already existing to help first time homebuyers, our Lend A Hand scheme is unique in that it does not limit the first time buyer to one particular type of mortgage – they can choose any one from N&P’s wide range of fixed rates, discounts, and trackers. Just as we offer a wide choice to self-builders. With our Lend A Hand scheme, the parent and homebuyer can choose the best type of mortgage for the first time buyer’s needs. We hope this will be a great help to struggling first time buyers.”
Main details:
- The first time buyer, not the parent, is the primary provider and must be able to support a minimum of 75% of the required loan.
- The parent and son/daughter are joint applicants and are processed as such, they are both jointly and severally liable for the mortgage debt.
- Whilst the parent is a joint applicant they are not named on the legal title of the property to avoid capital gains tax implications.
- The parent’s income is used to ‘top up’ the maximum loan and is only allowed up to 1x their gross salary.
- Current retirement criteria and maximum age limits will be applied to the parents to ensure that N&P is taking full consideration of what they can afford now and in the future.
The parents will be required to sign a declaration, confirming that they understand they will not gain any financial benefit and advising them to seek independent legal advice.
