Homeowners whose personal circumstances change can be faced with a number of tough decisions and limited options, but one lender is now offering a helpful new product.
Going through a separation or divorce is difficult enough, without the added stress of trying to sell one property to create two for the partners involved. What to do with the family home is one of the biggest financial decisions couples face and the options available are not always feasible. However, a new mortgage product from Loughborough Building Society aims to help those facing a major life change.
For many people, taking on the existing mortgage for the family home or getting a mortgage for a new property alone is unaffordable. In some cases, a “guarantor mortgage” is the only option, assuming they have a close relative that will act as a guarantor, and legally agrees to take responsibility for the mortgage if the borrower fails to repay. Until now there has been little, if any, specialist support for separating partners to secure mortgages independently.
A new type of guarantor
The Fresh Start mortgage is targeted at borrowers who cannot, without the help of a traditional guarantor, get a mortgage. Instead of relying on a close relative to take on the entire burden of responsibility for a mortgage, a deposit guarantee scheme enables them to deposit a cash sum into a savings account or permits a collateral charge to be registered on their own home. This guarantees 20% of the value of the property the mortgage applicant wants to purchase.
While still reliant on a guarantor to obtain a mortgage, the risk is significantly reduced. Plus, guarantors do not have to gift away their savings to help. Business development manager at Loughborough Building Society, Ashley Pearson, said: “We’ve found that family members are keen to help one another, but sometimes they just don’t know how they can. This solution is becoming more and more sought after.”
The Fresh Start mortgage recognises that life is not always simple. The possibility of being able to stay in the family home or purchase a property of their own for those facing separation is sure to be a huge relief.
