Castle Trust is launching a new mortgage product specifically designed to support couples who are starting a family.
The new Family Friendly Mortgage is an equity loan with no monthly payments which reduces the income strain of home ownership whilst one partner takes a career break to bring up a family.
Sean Oldfield, CEO of Castle Trust, said: “Our new product will reduce a couple’s monthly mortgage payments by at least 25%.
“The Office of National Statistics’ 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 23.9, but by 2012 it was up to 30.7.
“We can see that couples are waiting longer and longer to have their first child. Whilst there are a number of contributory factors, the impact of losing one income has been getting progressively more difficult to manage as long term house price inflation continues to outstrip earnings growth. We have worked really hard to design a product and lending criteria which will help new parents crack this problem.”
The Family Friendly Mortgage (FFM) comprises a second charge equity loan of 20% of the value of the relevant property. Borrowers with an existing loan to value ratio of 80% or less are eligible.
The proceeds of the 20% loan (which has no monthly repayments) must be used to pay down the existing conventional mortgage which results in the monthly repayments of that mortgage being reduced by at least 25%. If the borrowers also move their conventional mortgage from capital repayment to interest only, the monthly savings will be greater.
Applicants’ existing mortgage must be arrears free. The monthly cost of the reduced conventional mortgage must be affordable based on the remaining one income. Borrowers must confirm that they intend to redeem the FFM at a point in the future when the second partner returns to work. It is expected that the majority of applicants will plan to use the FFM for between five and ten years but there is no minimum term and there are no early redemption fees. Redemption may be through sale or remortgage of the property.
On redemption of the FFM, Castle Trust will receive the amount of their original advance plus 40% of the increase, if any, in the value of the mortgaged property calculated from the date that the FFM was taken out to the date of redemption.
