What Is a Family Offset Mortgage?
Your home may be repossessed if you do not keep up repayments on your mortgage.
If you’re a parent of adult children who are struggling to get on the property market, you may wonder if there’s anything you can do to help. Aside from giving them cash in hand to pay for a deposit, there is another option – the family offset mortgage.
Also known as a ‘parent offset mortgage’, a family offset mortgage is a way to help family members get on the property ladder. While this type of mortgage is predominantly used by parents to help their children, it can be used to help any relative.
It works by linking a savings account to the mortgage. This is offset from the amount you owe, meaning the overall debt is reduced. This is how most offset mortgages work. However, a key difference with the family offset loan is that it’s specifically attached to the parent’s savings account, but the mortgage is not held in their name. Instead, it is held by the children, or nominated relatives.
The obvious benefit is that repayments are smaller and more manageable. It reduces the amount that’s borrowed in the first place and decreases the LTV ratio.
Why not just pay for your child’s deposit?
You may think that paying for your child’s deposit makes more sense – it’s certainly quicker and less hassle to set up than arranging a family offset mortgage. However, once the child has paid off an agreed proportion of their mortgage, the savings money is returned in full to the parents. This means you get your money back – and you may even get some interest.
We hope this guide has explained what a family offset mortgage is and how it could help your children, grandchildren, or other family members finally own a home of their own.