by Mark Johnston
A ‘Family Friendly Mortgage’ Product…..
It seems that the impact of losing one income has made it progressively more difficult for younger couples to combine children with home ownership.
Recent research has revealed that more and more couples are waiting longer and longer to have their first child. One of the contributory factors of this decision is the impact of losing one income.
The Office of National Statistics (ONS)’ latest data on births in England and Wales reveal that the average age of women having their first baby has risen every year for over 30 years.
In 1970 the average age of a first time mother was around 23 years old, but by 2012 it was up to approximately 30 years old.
Therefore, Castle Trust, a specialist lender in UK equity loans, has launched the Family Friendly Mortgage.
Castle Trust invented this ‘income bridging’ product for new parents, where one parent intends to takes a career break after the birth of a child.
Castle Trust chief executive Sean Field said “We have worked really hard to design a product and lending criteria which will help new parents.”
The Family Friendly Mortgage is a ‘second charge equity loan’, so in other words it is a second mortgage, of up to a fifth or 20 per cent of the value of a home.
The new product reduces the monthly repayments of the first mortgage by at least 25 per cent and the reduction can be even more if borrowers switch their first mortgage from capital repayment to interest only deal.
For example: if a home owner has a property worth £200,000 and they have an existing mortgage of £160,000, they can then use the £40,000 Family Friendly Mortgage to reduce their existing mortgage to £120,000, therefore reducing their monthly payments by a quarter.
However, the monthly cost of the reduced conventional mortgage must be affordable based on the remaining partners income and borrowers must confirm that they intend to redeem the Family Friendly Mortgage at a point in the future when the second partner returns to work.
Also only borrowers with existing loan to value ratios of up to 80 per cent and all applicants’ existing mortgage must be arrears free.
On redemption of the family friendly mortgage, Castle Trust will receive the amount of their original advance plus 40 per cent of the increase, if any, in the value of the mortgaged property calculated from the date that the family friendly mortgage was taken out to the date of redemption.
So in other words, for every 1 per cent of the value of the property home owners borrow interest free from Castle Trust, they then give up 2 per cent of its future value.
Although some financial experts state that the Family Friendly Mortgage and other shared equity home loans are simply gambles on future house prices and similar mortgages went spectacularly wrong when the Eighties housing boom turned into the Nineties crash.
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