We don’t have a computer,” is not what you expect to hear from the chief executive of a building society. But Mark Bogard and his Epsom-based Family Building Society are helping shake up the lending industry in the capital.
Founded in 2014, the society takes the approach that if it requires a village to raise a child, it can certainly take a family to buy a home in London, where young buyers need to raise an average deposit of £100k.
Most first-time buyers don’t have that sort of money, nor do their parents, who would be reluctant to part with their life savings, probably already earmarked for their retirement. But families can still help.
At the Family Building Society, up to 12 relatives can combine their wealth to help a family member get on the property ladder. They can help in a variety of ways, from depositing money in an interest-earning account (1.15 per cent a year) or by allowing a charge against their own property.
The family money need not be a gift. Each contribution is held in a separate account and is typically released after 10 years providing mortgage payments are up to date. This means family members can still use their money to fulfil their dreams,
The family security means you can buy a property with just a five per cent deposit and still have a competitive rate of 3.09 per cent for five years (2.99 per cent for three years). It also means you can borrow up to 5.33 times your income for up to 40 years.
Nonetheless, using family assets as security is a big ask. If it all goes wrong and the property has to be sold at a loss, the shortfall is covered from the family’s capital. This quite rightly makes many young buyers nervous.
“Our research shows that children would rather soldier on than take money out of their parents’ retirement pot,” says Bogard.
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“We will automatically waive the buyer’s mortgage payments for up to six months should they become unemployed through no fault of their own, on a one-off basis. This gives them a safety net should the worst happen.”
Better still, this insurance comes with the mortgage for no additional cost.
No more ‘computer says no…’
In contrast to its innovative product, the Family Building Society’s mortgage assessment is old school with no computer assessments or credit scores.
Instead, all its underwriting is done by hand, with real people talking to the client to ensure that everyone’s personal circumstances are taken into consideration. This means it has a better chance of the lender saying “yes” than many of its competitors’ computers.
The Family Building Society recently said “yes” to Jack and Jo Crook, allowing them to purchase their first home together for £300,000 in Dorking, in the process, saving them over £300 per month compared to their rent on a similar property.
“The Family Mortgage is much more flexible than mainstream loans which have stricter rules. We were allowed to borrow more by the Family Mortgage. All our personal circumstances were taken into consideration, rather than just straight income and expenditure,” comments Jack.
“I’d say the Family Building Society made the process easy and quick. They did everything they could to help and made sure we had an affordable mortgage, which left us better off.”
The Family Building Society has a long heritage. It started life as the Post Office Building Society in 1896.
Since then much has changed, including internet and phone access, meaning you can now manage your mortgage application and all subsequent communications from your armchair. If you prefer to go via a broker, you can do that, too.
Perhaps because it doesn’t have an extensive branch network, the society’s fees are competitive.
The mortgage application fee is £175, the product fee £599 and there are no valuation fees for properties under £500,000.