With our Head Start product, the Buyer purchases a property in their own name with a mortgage of up to 100% of the property’s value. This is done with the support of one or more family Helpers, who will be joint borrowers on the mortgage. The Helper(s) will also provide additional security through a cash deposit or a charge over their home.
This discount mortgage comes with an initial rate of 5.40% which includes a 2.70% discount from our Standard Variable Rate, currently 8.10%, for the term of the mortgage. The interest rate for this mortgage is ‘floored’, which means that while the rate may increase, it will never fall below 2.50%.
What are the key features of this product?
This is a variable rate mortgage product which means monthly payments can go up or down during the term of the mortgage. This is different to a fixed rate product. The rate of interest is linked to the Society’s Standard Variable Rate (SVR) for mortgages. For the term of the mortgage, the interest rate charged will be 2.70% below the Society’s SVR – this is the discount rate.
The lowest interest rate you might pay during this period will be 2.50% which is called the “floored” rate. This means that if the Society’s SVR is below 5.20% at any time during the period of the product, you will not benefit from the full rate of discount of 2.70%.
This product is available on:
A Capital & Interest repayment basis. This means your monthly repayments will contribute to paying back the initial loan as well as the monthly interest on the remaining balance. Over time, this will mean the amount owed will reduce and the interest will also reduce.
This product is available for properties in England and Wales.
There is no fee payable for setting up this mortgage.
This product is available for loans of at least £125,000 and up to £500,000.
The product requires a joint family borrower.
If the proposed loan exceeds 80% of the property value (known as LTV), a family helper is required to provide additional security.
This product comes with a free valuation of the helper's property being used as security.
The youngest borrower must be under 50 years old at application.
Who is this product designed for?
This product is designed for customers who are wanting a residential mortgage with support from a family helper who:
are looking to purchase or remortgage a property.
have little or no deposit.
have surplus monthly income to manage their finances if the Society’s SVR goes up which would mean an increase to the monthly repayment amount.
do not intend to make overpayments of more than 10% in any of the first 5 years.
Who is this product NOT intended for?
This product is not intended for customers who:
want or need the certainty of a fixed monthly repayment for the term of the product.
want an Interest-only repayment type.
plan to repay more than 10% of the loan in any year within the first 5 years as this will result in a charge.
Does this product deliver "fair value" for customers?
Being a mutual building society, all our products are priced to balance the needs of our Member savers and borrowers and the Society’s operating costs to support the Society’s long-term future.
We support our mortgage customers by providing each applicant with a bespoke, personal, and individual approach. We largely deal with people whose circumstances do not fit into the standard requirements of automated decision-making processes used by larger lenders.
We believe this product represents fair value for the customers it was designed for considering the customer support provided before, during and after the application.
Initial Rate
5.40% which includes a 2.70% discount from our Standard Variable Rate, currently 8.10%, for the term of the mortgage. The interest rate for this mortgage is ‘floored’, which means that while the rate may increase, it will never fall below 2.50%.
Fee Details
No fee
Maximum LTV
100% - If over 80% LTV, then a family helper is required to provide additional security. This can be done by depositing funds into a Vernon Savings Account or taking out a legal charge for the amount on the family helper’s own property. If a charge over property is provided, then this must be equivalent to the amount of the loan that exceeds 75% of the value of the property being purchased.
Loan Size
Minimum £125,000 - Maximum £500,000
Mortgage Term
35 years
Portability
This mortgage product is portable to a new residential mortgage on a different property when the new mortgage is taken out simultaneously with the repayment of the existing mortgage. You would need to meet our credit and affordability requirements for the new mortgage, the new property would need to be acceptable to us, and approval of a new mortgage would be subject to our prevailing Lending Policy.
Repayment Method
Capital & Interest
Incentives
Free valuation on the family helper’s property to be used for security.
If the family helper deposits funds as security, the monies will be invested into a 35-Day Notice Account for the period of involvement with the mortgage and will receive interest associated with this account.
As long as the terms of the mortgage are met by the borrower, the family helper will receive their funds back or have the legal charge removed from their property after five years.
Restrictions
Lending restricted to England and Wales.
Minimum property value of £140,000 is required.
If a legal charge is being taken over a family helper’s property:
Minimum £100,000 valuation if a 1st charge is being taken (unmortgaged property)
Minimum £250,000 valuation if a 2nd charge is being taken (property mortgaged)
Family helper joint borrower required.
Youngest borrower to be under 50 years old at application.
Maximum age at end of term for borrower is 75.
If there is proof that the applicant can afford their mortgage in their own right within 5-7 years, there is no maximum age for the family helper. If we don't have a plan for the family helper to be removed, the maximum age is either the lower of retirement age or 75.
Early Repayment Charge Details
A full or partial capital repayment, which exceeds 10% of the capital balance amount in the first five years of the mortgage term, will attract an early repayment charge of:
5% in the 1st year
4% in the 2nd year
3% in the 3rd year
2% in the 4th year
2% in the 5th year
Representative Example
A mortgage of £131,345.00, payable over 28 years, on a capital and interest repayment basis, with an initial payable rate of 5.40%, which includes a 2.70% discount from our Standard Variable Rate (SVR), currently 8.10%, for the term of the mortgage. The term would require 336 monthly payments of £758.94.
The total amount payable would be £255,628.84, made up of the loan amount (£131,345.00), plus interest (£123,658.84), Standard Valuation Fee (£205), Solicitor Fee for the purchase (£250), Funds Transfer Fee (£15), and a Mortgage Exit Fee (£155).
The overall cost for comparison is 5.60% APRC.
This information may not be representative of your personal circumstances and your payments may differ from this. Representative data as of 1st January 2023.
How does Head Start work?
With a Head Start Mortgage, the Buyer purchases a property in their own name with a mortgage of up to 100% of the property’s value.
The mortgage is supported by a Helper(s) who will be a joint borrower(s) on the mortgage. The Helper(s) will also provide additional security in the form of cash or a charge on their property.
How much can I borrow?
The maximum loan amount is £500,000 and the minimum loan is £125,000.
What is the repayment basis for this mortgage?
The Head Start Mortgage is available on a capital and interest repayment basis only.
What is the maximum/minimum mortgage term?
The maximum mortgage term is up to 35 years, the minimum mortgage term is 5 years.
How do you assess affordability?
A standard full affordability assessment is conducted for all borrowers. If the proposed mortgage is not affordable based on the buyer’s sole income, we can take the Helper’s income into account, we would however require the Buyer to be able to meet at least 75% of the monthly mortgage payment.
How does the Helper support the Buyer?
If the Buyer has less than 20% or no deposit available, then the mortgage can be supported by a Helper either depositing cash into a Vernon savings account or allowing a charge over their own home. This is referred to as ‘security’.
What security is required?
The Head Start Mortgage is a minimum 80% LTV product; therefore, a Helper depositing cash in a Vernon savings account as security will need to provide or (if the Buyer also puts down a deposit) top up to 20% of the purchase price/valuation whichever is the lower. Please note, if the Buyer puts down a portion of the deposit, this is taken as a normal deposit and would not be deposited into a Vernon savings account.
or
Rather than cash, a Helper can take a charge over their own home for the equivalent amount that makes up the 25% of the Buyer’s purchase price/valuation whichever is the lower. There are terms and conditions associated with this route, speak to your Mortgage Adviser for more information.
What happens if the mortgage account goes into arrears?
If mortgage payments are not made, we will contact all borrowers to request that the shortfall is paid.
Should you experience any financial difficulty, it is important that you get in touch with us as soon as possible so that we can give you support and guidance. Any supporting cash security cannot be used to make up missed mortgage payments – this would only be called upon if losses were made on repossession.
What happens if the property is repossessed?
In this unlikely event, the property would be sold and the proceeds would be used to repay the outstanding loan, plus any interest and charges. If the sale proceeds are insufficient, then we would rely on the security provided by the Helper to make up any shortfall.
Will all borrowers get regular statements?
Yes, statements will be issued annually to all borrowers.
Who is eligible to apply?
Buyers who are aged between 18 and under 50 at the date of application.
Who owns the property?
The property is solely owned by the Buyer.
Are there restrictions on the property?
Do I have to be a first-time buyer?
No.
What is a Helper?
A Helper supports the Buyer to purchase a property and jointly borrows the money, jointly agrees to meet the monthly payment and provides security.
Who can be a Helper?
A Helper can be a parent(s), step-parent(s) or an aunt/uncle. In some circumstances, we can consider other close family members instead.
Can more than one Helper provide support?
Yes. You should note that all Helpers would be named as joint borrowers on the mortgage.
Can a Helper help more than one member of their family at the same time?
Yes, this is certainly possible for the cash deposit route. Multiple charges over the Helper’s home as security would depend on several factors. Speak to us for more information on terms and conditions associated with this route.
What legal charge is taken over a Helper’s property?
If there is no mortgage on the property, then we take a first legal charge. Where there is an existing mortgage, we take a second legal charge.
Are there restrictions on the property to be used as supporting security?
The property must be in England or Wales. If it is in joint names, then it must be as Joint Tenants and not Tenants in Common. If there is a mortgage already on it, then the value of the house must be more than £250,000 and the combined mortgage and second charge must not exceed 70% of its value.
What is a cash security?
Cash security is a deposit placed in a savings account with the Society and a legal charge is taken over it. This means that the cash can be used to repay any losses that the Society may incur in the event of repossession and sale of the property.
The cash will be deposited into a 35-Day Notice Account and interest will be paid throughout the period of security. The Vernon may change the interest rate on this account at any time.
Do you pay interest on the cash security?
The cash security will be deposited into the Vernon’s 35-Day Notice Account and will receive the interest payable on this account type. More information, including the interest rate payable, can be found on our website. Full details will be provided to you during the application process.
Is a cash security covered by the Financial Services Compensation Scheme?
Yes, full details of FSCS cover will be provided when a 35-Day Notice Savings Account is opened.
Can additions or withdrawals be made to the cash deposit?
As the funds are being used as security for a loan, no withdrawals or further deposits can be made to the account until the minimum 5-year term has passed. Therefore, we will not issue a passbook for the account.
Can a combination of cash security and charge over property be used?
No, we would require one or the other, not a combination of both.
When does a Helper need to get independent legal advice?
As a Helper(s) is a joint borrower on the mortgage loan, they will receive legal advice from the solicitor for the purchase (purely regarding the purchase). However, where additional security is being provided, the Helper(s) is required to obtain legal advice from a solicitor that is independent to the house buying process to avoid any conflicts of interest. Any cost for this advice will be met by the Helper(s).
What is the extent of the Helper’s liability?
The Helper(s) is jointly and severally liable for the full mortgage amount and all repayments while they’re on the mortgage. If repayments are not met and this ultimately leads to us taking possession of the property, then all borrowers are liable for any shortfall that may occur after the sale of the property. Where additional security has been given, in the form of cash or property, then this may be used to make up this shortfall. This will be explained by your legal representative during the house purchase process.
How is a Helper released from their commitment?
So long as the Buyer and Helper(s) have met all the contractual terms of their mortgage, the Helper will receive their security back after five years.
After these five years, to be fully released from their commitment and responsibility for the mortgage, an affordability assessment will be conducted to prove that the Buyer can afford to take on the mortgage by themselves.
What happens if a Helper dies?
The deceased’s liability would remain, as would any charge over cash or property. Should this occur, we would discuss the options with the representatives of the deceased’s estate.
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