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How Family Offset Mortgages Work

How does a family offset mortgage work if you have multiple savings products spread across applicant accounts? Here we explain the family offset mortgage and the inner workings of this discounted mortgage product.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-07-17
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What Is A Family Offset Mortgage?

As more UK homebuyers look for ways to get onto the property ladder, and more new products are released, family offset mortgages are becoming a more popular option.

Here we'll explain how a family offset mortgage works - if you would like to apply, or wish to know whether you are eligible, give us a call on 0330 304 3040, or email [email protected].

Family Offset Mortgages Explained

A family offset mortgage uses savings held by a family member to offset the balance owed on a mortgage, thereby reducing the interest payable and making a mortgage more affordable.

The most common scenario is a parent supporting a child in buying their first property but can be used in several different scenarios.

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Based on your yearly income,
you may be able to borrow

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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How Do Family Offset Mortgages Make it Easier to Buy a First Home?

Offsetting the savings account of a family member means that the interest charge reduces. Therefore, a lender is more likely to accept an application with a lower Loan to Value ratio, with the savings taken into consideration, and better interest rates, as the risk is lower.

For example, if you were to take out a family offset mortgage of £300,000 and link a family member's savings account with £50,000 in savings, you will only be borrowing, in effect, £250,000 and pay interest on that value.

Alternatively, you could gift those savings towards a mortgage deposit. The difference is that with a family offset mortgage, the savings are returned when the mortgage is repaid to around 25% or 30% depending on the terms.

What are the Advantages of Choosing a Family Offset Mortgage?

There are several advantages:

  • Children are more able to buy a first home, without needing to save a substantial deposit.
  • Monthly repayments are reduced, making a mortgage more affordable.
  • Interest rates are more competitive, given the reduction in the Loan to Value ratio.
  • Parents can retain their savings while still helping a child to buy a property.
  • The leveraged savings are returned after a certain period, or after a specific value has been repaid.

What are the Eligibility Criteria for a Family Offset Mortgage?

Lenders will need to assess affordability to ensure the applicant can keep up with the repayments.

According to each lender, some policies dictate which family members can contribute a savings account towards a family offset mortgage.

Other criteria consider your credit rating, the type of property, and your income.

As examples, Barclays and Nationwide only permit offset savings to be contributed by legal relatives.

Is There a Minimum Savings Threshold for a Family Offset Mortgage?

The savings value required depends on how much the property is worth - usually around 10% of the purchase price.

In other cases, there is a benchmark minimum for any family offset mortgages, say at least £50,000 in savings or an annual income requirement from the owner of the savings of at least £75,000.

Are Family Offset Mortgage Calculators any Good?

Mortgage calculators are a useful tool to get an idea about what you could borrow and what it might cost per month.

However, these cannot consider your circumstances or eligibility, so the only way to get an accurate idea is to speak with an independent broker.

Which UK Providers Offer the Best Family Offset Mortgages?

The best lender for you will depend on how much you need to borrow, your income and mortgage requirements, and what sort of offset savings you have available from a family member.

It is essential to consult a whole-of-market broker before applying for lending. If you do not meet the criteria and are rejected there is potential to damage your credit rating.

Lenders range from high street banks to specialist bad credit lenders, so there are many options to compare, and different deals to choose from.

Your ideal product will be personal to your borrowing requirements, so the right product is very much dependent on your affordability rating.

Professional Advice with Family Offset Mortgages

If you're interested in potentially applying for a family offset mortgage, business loan broker can help!

As an accredited, independent, whole-of-market broker, we make it our business to find the most competitive deals out there, to get you the lending you need at the most affordable prices.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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