Family-Assisted Mortgage for First-Time Home Purchase

• Client: Applicants purchasing their first family home with financial support from a family member
• Property: Residential property valued at approximately £700,000
• Challenge: The applicants’ income alone was insufficient to support the required borrowing, while the supporting family member wanted to assist without being named on the property deeds
• Finance: £450,000 mortgage at 64% LTV, supported by a £250,000 gifted deposit and additional pension and investment income

Family-assisted mortgage applications can involve a number of additional considerations, particularly where a family member is prepared to contribute towards the deposit or affordability but does not want to become a legal owner of the property. Enness was approached by applicants looking to purchase their first family home with financial support from a family member.

The property was valued at approximately £700,000. The applicants had a gifted deposit of £250,000 and required mortgage funding of £450,000, representing 64% loan to value (LTV).

Although the LTV itself was achievable, the applicants’ own income was not sufficient to support the required mortgage under standard affordability calculations. The application therefore required additional financial support from the family member, who was prepared to contribute pension and investment income to help bridge the affordability shortfall.

There was also a requirement for the supporting family member to participate in the mortgage structure without being named on the property deeds. This created an additional consideration for lenders, particularly given the applicant’s age and the potential implications if they were treated as acquiring an interest in the property.

The application therefore required a lender that was comfortable with a joint application, sole proprietor structure and guarantee. The supporting family member’s pension and investment portfolio provided additional reassurance to the lender while allowing the property ownership to remain with the applicants.

Enness approached a specialist lender with experience of more complex family-supported mortgage structures. The team presented the applicants’ combined financial circumstances and demonstrated how the additional income and security could support the proposed borrowing.

Following negotiations, Enness secured a £450,000 capital-and-interest mortgage over a 27-year term. The £250,000 deposit was provided as a gift, while the supporting family member’s pension and investment income was incorporated into the affordability assessment. Their significant pension and investment portfolio also provided additional security under the guarantee structure.

Importantly, the structure allowed the supporting family member to remain off the property deeds. This helped avoid the property being treated as an additional property acquisition by that individual, subject to the applicable tax rules and individual circumstances.

A range of fixed-rate options was available at the time, including a two-year fixed rate of 2.69%, a three-year fixed rate of 2.99% and a five-year fixed rate of 3.19%. Early repayment charges varied according to the selected fixed-rate period.

The case demonstrates how UK mortgage finance can sometimes be structured around wider family circumstances where the applicants’ own income is insufficient to support the required borrowing. Gifted deposits, additional income and guarantees can form part of a bespoke lending structure, subject to lender criteria.

For families looking to support first-time buyers without necessarily becoming property owners themselves, specialist mortgage finance can help identify lenders able to consider more complex family-supported arrangements.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, valuation, property suitability and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances. Any tax treatment should be confirmed with an appropriately qualified tax adviser.

Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. Where a family member provides a guarantee or additional security, they may become responsible for the borrowing if the mortgage cannot be repaid. All parties should ensure they understand the obligations and risks associated with the proposed mortgage structure.