Lloyd's TSB 'Lend a Hand' - New FTB 95% mortgage product

blunt_crayon

I just read about this in the Metro and it seems quite an interesting product:

http://www.metro.co.uk/money/article.html?First-time_buyers_have_95%25_mortgage_with_conditions&in_article_id=667978&in_page_id=36

http://www.lloydstsb.com/mortgages/lend_a_hand.asp

Basically FTB's can get a 3-year fix at 4.39% with only 5% deposit, provided that a 'helper' puts 20% deposit in a Lloyd's savings account. At the end of the 3 years the FTB *should* have an LTV of 90% or less, leaving them free to take on a normal mortgage.

This seems very suitable for me as my mum is due to receive a large payout at the end of summer, and would like to help me buy my first home, but does not want to tie up the cash in property... obviously with this it is tied up for the first 3 and a half years but when the deal ends she could withdraw the funds without me having to sell the house, plus she is earning a reasonable interest rate on the savings.

I'm no expert but it looks good to me... am suspicious of banks though, is there anything i'm missing? any flaws to this product?? Obviously there is the risk that prices drop to the point where the FTB is still has a LTV of over 90% and whatever that entails for FTB/helper.

Dan_1976

Dont worry, if it goes wrong the Tax payer will help Lloyds TSB out!

At least they are trying, will not be for everybody but it will help. The helper will have to be able to deposit the money knowing they wont need it.

beecher

I'd think the risk of being above 90% LTV or even in negative equity after 3 years is fairly high and for that reason I'd keep saving and wait til you can get a normal mortgage.

From the Lloyds TSB website it seems that you can only get the money released if your LTV is less than 90% so you'd have to be sure your mum is willing to take the risk with her savings.

You can ask for the charge to be removed and your savings released (only if the 42 month period has expired) when the mortgage represents 90% or less of the property's value

neas

and if house prices fall further and you have neg equity? They keep your momma and daddys savings in a !!!! poor rate for a long time.

Essentially its win-win for bank.

blunt_crayon

neas wrote: »

Essentially its win-win for bank.

isn't it always?

agree that the main catch is the tying up of savings and risk of negative equity. I'm not thinking seriously about getting this mortgage, wouldn't be looking at buying until this time year probably. I just haven't come across this type of product before and it does seem to have some benefits.

Mini_Bear

This deal is just a headline grabber and nothing more. theres been almost hysteria at wrk around this. until it boiled down that your parents wud hav to tie up 40k on a 200k house for at least 3 yrs. anyone with cash at the mo will not want to fix an interest rate for longer than a yr as interest rates will hav to rise at some point.
i wud be suprised if many took up this offer, its not like parents can MEW to get this cash.

maninthestreet

Surely it would make more sense for the 'helper' to just lend the additional 5% of the purchase price to the borrower, so they can put down a 10% deposit?

blunt_crayon

maninthestreet wrote: »

Surely it would make more sense for the 'helper' to just lend the additional 5% of the purchase price to the borrower, so they can put down a 10% deposit?

This deal gives you a rate of 4.39%, as the savings count towards a LTV of 25% giving you a better rate. A normal 90% mortgage would be in the region of 6-7%.

happybroker

your mum would get 3.5% interest on her savings also which isn't so bad currently. If you could afford to overpay a little, bargain hard for the house and keep an eye on the market then this could mitigate the risk of mum ot being able to get the money back after 3 years and even if you didn't (and prices dropped) she isn't going to lose the money at the end of it.

this package certainly isn't going to suit every one but it has it's merits....good on Lloyds TSB for trying something new I say.

dimbo61

Does the mortgage deal being offered by lloydstsb allow overpayments ?
4.39% fixed is a good rate and 42 months gives you time to repay some of the debt and therefore increase the amount of equity you have in the property.
hopefully in 3 years property will have recovered some of the losses and is still a good long term investment and somewhere to live!
only thing is the poor return on your mums savings
Savings rates are poor at the moment !
Good Luck

Arthurian

According to themirror.co.uk, if house values tumble, then after 3 years your mum gets 0% on her savings and cannot remove them.

"The only catch is if the loan hasn't fallen from 95% of the home's value to 90% after three years, Lloyds holds on to the relatives' money until it does.

It it will then earn 0.5% below the bank base rate. That would be 0% today, although Lloyds says this might improve."

http://www.mirror.co.uk/news/city-news/2009/05/21/lloyds-lends-a-hand-to-new-buyers-115875-21377106/