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Sunday, January 16, 2011

Mum and dad gets some help

At long last housebuilders and finance companies have got together to make the inevitable that bit easier to occur.

Bank mum and dad is already the default lender for the majority of first-time buyers. According to the Council of Mortgage Lenders, 84% of first-time buyers, under the age of 30, have financial assistance with their property purchase.

This week Barratt announced a deal with Hitachi Capital, the financial services group, that will allow parents to borrow up to £50,000 on behalf of their children to help them to get on to the housing ladder.

The scheme is called Helping Hands.

So how does the Barratt/Hitachi loan work? Buyers must secure a normal mortgage for the majority of the property price and have a 5% cash deposit. Hitachi Capital will then lend up to 15% (up to a maximum of £50,000) to the buyer’s parents or legal guardian to meet the rest of the cost. The loan is unsecured (meaning that the borrower does not have to back it up with assets like a property) and payable over a 12-year period, at a fixed-interest rate of 5.4%. There are no early repayment charges and unlimited overpayments are allowed at any time during the agreement.

I reckon this will be the first of many such financial products. Dick Stroud

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