The new Family Affordability Plan from Barclays means the lender will consider your parent's income when deciding whether to approve you for a mortgage.
Barclays has introduced a new scheme called the Family Affordability Plan, which combines your finances with your parents’ income when you apply for a mortgage.
It’s the latest in a series of guarantor-based offers from banks and building societies, reserved for those who would otherwise struggle to get a mortgage on their own.
What is the Family Affordability Plan?
It’s a guarantor mortgage, whereby you can join forces with your parents to boost your borrowing. If you’re unlikely to be accepted for a home loan based on your own income and savings, then the financial backing of a relative can make all the difference.
Although it becomes a joint mortgage, your parents do not become co-owners of the property.
It’s the first initiative under the bank’s new ‘Helpful Start’ campaign - aimed at people struggling to get on the property ladder or those hoping to move up to the next rung.
How does it work?
Parents’ or relatives’ incomes are taken into account when the bank calculates how much to lend you.
If your application is accepted, then all parties are jointly liable for the mortgage. So if you fail to cough up the repayments, then the bank can knock on your parents’ door to ask for the money.
What deals can I get?
[SPOTLIGHT]The Family Affordability Plan is available on all of Barclays’ mortgages. It even extends to the bank’s NewBuy deal, for buyers with only a 5% deposit. The rate for this is fixed for three years at 5.89% and comes with a £499 fee.
For more information about NewBuy and other deals available under the scheme read Santander launches NewBuy mortgage range.
What are the drawbacks?
Everyone applying for the deal, whether as guarantors or prospective homeowners, is legally responsible for the monthly repayments. All parties must meet the eligibility criteria and the deals are only available to buyers in England and Wales.
If you miss payments, then everyone named on the mortgage could see their credit rating affected. And even if you’re responsible for all the payments, the plan might affect any future borrowing your parents apply for on top, for example, if they want to take out a loan for home improvements on their own property.
Because of the potential pitfalls, any family members who wish to be jointly named without owning the property must take independent legal and tax advice. This is a condition of the whole deal.
Can I remove my parents from the mortgage?
If you get to the stage where you can afford the mortgage by yourself, based on your own income, you can remortgage and remove your parents as joint holders. However, beware that you will have to apply, be approved and may need to pay extra fees on top.
If you want to switch to a different lender, there is no guarantee that you will be approved for one of their mortgages, so you might have to stick with your parents as guarantors until circumstances change. To check what home loans you might be eligible for, use our mortgage comparison tool.
Alternative guarantor mortgages
The Cooperative Bank offers a guarantor mortgage to buyers with a 15% deposit. The rate is fixed for three years at 4.59%, with no application fee. You can also borrow up to 4.5 times the guarantor’s income.
Lloyds TSB’s Lend-a-Hand deal only asks you to pay a 5% deposit, so long as a guarantor puts a further 20% into the bank’s dedicated savings account. Up to two people can help you make up the savings needed and they receive interest on their deposit, while you have access to better mortgage rates -similar to those available for buyers with an upfront 25% deposit.
More on mortgages:
Rightmove: property asking prices hit new high in June
Buying is cheaper than renting
Mortgage rates are going up … and down
Inbetweener mortgages: for buyers with medium-sized deposits
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Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage