Possible help for first time buyers?

[tek-monkey]

Just seen this, which seems interesting. Essentially they will stump up 40% of the value of the house, and they own that % in equity. When you sell, they get their % based on selling price. You pay no interest on what you borrow for the first 5 years, years 5-10 are at 1.75% and any time after that is at 3.75%.

So it seems I can get a much bigger house than I could buy on my own, still own the same moneys worth, and if I sell within 5 years I've got nowt to pay other than the equity share back. Am I missing something? Cos it seems a bit too good to be true...

 

[Gramaisc]

It looks to be an interest-only mortgage, in effect, so you have to have some other plan to pay back the capital at the end, almost like the old endowment mortgages were. The 'catch' is that that amount is variable and if house prices shoot up then the value of the percentage that they own might be far greater than it was at the start. If nothing else, it will be difficult to plan for it, as it will be a variable amount. Read it all through and be sure that it is the right way for you. The Co-op Bank is the only bank that I would deal with and they are far less likely than others to let you do the wrong thing. Mike Bushell, in the Stafford branch will tell you the truth.

 

[John Marwood]

Caution Caution Caution

Monish Monish Monish

Ladders and Property be avoided for yet six seasons more

This market is no closer corrected despite what the media might proclaim, with short sighted sound bites and mixed metophore


The old adage is still true this day

Better a rent boy be than a borrower up a tree

 

[tek-monkey]

From what I can see yes, the amount payable at the end is variable. However, that amount is entirely based on property value, so if they are 'buying' 40% of my house they are entitles to 40% back at the end. I'm fine with that, I was only thinking a 10 year stay anyway then I'd want somewhere else. I'd be aiming at the bottom end of their scale (20%), as I'd like to own a good proportion of my place, but it means I'd need no deposit as I could use their loan for it. Despite earning a good wage now I have no savings, so that is the killer for me.

Gonna call them on Monday and see what the deal is, not like I have to buy a house.

EDIT: Main question, is the interest paid on the initial loan or the current value? As you'd need a valuation constantly if it was current value, so am guessing amount loaned. As its not for 5 years it wouldn't really matter that much, they're bound to go up over that period. At point of sale, I'd need to pay back whatever I owe. Means I couldn't afford a bigger house at that point, probably just a full ownership of the sort of house I'm currently in. However, that house will be better than what I could afford currently on my own.

It still seems too good, buy better than I can afford now and only worry about the difference in value when I sell. If I sell in 5 years, its essentially a free upgrade on my first house. Second house will be about the same as the first, rather than a step up, but will still be what I could have afforded at that point if I'd had a smaller house to start with. So it just means my first house is nicer than it would be normally, second wuld be as expected. What am I missing?

 

[Wormella]

I've filed this under Grown-Up Stuff, keep us up to date with what you find out Tek-Monkey if you could.

 

[Gramaisc]

The best thing to do is to go and talk to them. People are obsessed with not 'mis-selling' to you these days.

[ Even though it was more like mis-buying, in my opinion. ]

If everybody can afford to pay more for a house then it will jack the prices up within that range and make us all 'feel good' - not that I'm suggesting that it is simply a cynical ploy.

 

[darben]

There is a bit in the terms and conditions part that tells you that the % part of the repayment value is in line with increase in value of the house. They must do a yearly valuation somehow and adjust it that way, probably on assessing the value of sales of similar type houses in the area. This is easy to do if you go on to a site like checkmyfile you can do a post code search which has a rough valuation based on sales, so say if you buy a medium size terrace where there are lots of larger terraces will give the perception that terraces are a greater value, expect to be in for some drawn out disputes where you will need to get private valuations etc.. if the other way round then your quids in.

Also, if you make improvements on your house will this increase it's value etc...

I'd personally get some professional advice on this one as my perception is that is like having two mortgages on your home from the same lender. The deposit part being buy now pay later!

My general rule of thumb is that if something looks to good to be true it normally is, it's definately a case of buyer beware. Or the other hand it's could just be their way round giving out 100% mortgages, it may be worth comparing how much a loan of a similar value may cost you.

 

[tek-monkey]

If everybody can afford to pay more for a house then it will jack the prices up within that range and make us all 'feel good' - not that I'm suggesting that it is simply a cynical ploy.

Nope, I thought of that. If we can all afford bigger houses as first time buyers, those houses go up in price as demand outstrips supply. This gives their equity share a higher value, simply by lending more people money. Tis a cunning plan on their behalf!

I'll be calling them Monday, see what the crack is. Not as many cheap houses about as 3 months ago though, so maybe I'm late into this one.

I've filed this under Grown-Up Stuff, keep us up to date with what you find out Tek-Monkey if you could.

Yeah, this is bizarrely grown up for me too!

 

[tek-monkey]

There is a bit in the terms and conditions part that tells you that the % part of the repayment value is in line with increase in value of the house. They must do a yearly valuation somehow and adjust it that way, probably on assessing the value of sales of similar type houses in the area. This is easy to do if you go on to a site like checkmyfile you can do a post code search which has a rough valuation based on sales, so say if you buy a medium size terrace where there are lots of larger terraces will give the perception that terraces are a greater value, expect to be in for some drawn out disputes where you will need to get private valuations etc.. if the other way round then your quids in.

The onus is on you to get the valuation done whenever you make a repayment - should you choose to. You can only pay 5% back at a time, which makes that the big catch - you are stuck with them owning 40% effectively. I'm not sure on the interest part though, as surely they can't make you get it valued every year anyway. herefore the interest would have to be on amount borrowed, not related to the value of the house. I hope!

Will find out, not something I want to rush into anyway!

 

[darben]

I'm reading it as the loan being 20% up to 40% equivalent of year on year market rate value of the house, never mind the interest on top of that, when the five years comes around an added % on top of this could be quite hefty.

The lenders are quids in either way, especially if the value of your house goes up.

I may be wrong but if it were me I'd seriously consider getting some independant professional advice on this, it is possibly a good deal it sounds a bit similar to one of those buy half rent half schemes with the unknown quantity of you don't know whats going to be going on in the housing market. With interest rates being so low at the moment it's an opportunity for the lender to get a higher return on the loan. I'd try to make a comparison with what an similar size loan would cost you in the long term.

Ethical bank or not they are in business to make a profit.

 

[jim-my]

I'm a CeMAP qualified mortgage adviser, and I wouldn't touch any shared equity scheme with a bargepole. This is not professional advice however, just my own preference. An Englishman's home is his castle, etc, etc....

 

[Gramaisc]

A deal is good for you, if it works for you - and bad if it doesn't. The art is in getting enough information to decide which it is likely to be - and what is the likelihood of it going wrong for you, and then being prepared for that eventuality by keeping your eye on progress.
I had an endowment mortgage in 1980, and I knew then that there was an element of gambling involved. However, I got away with it and had a good few bob left over. I did, though, spend the last few years of it keeping a close eye on what was going on. Interestingly, the original prediction that I had in 1980 turned out to be a mere £7 lower than the actual pay-out in 2005 when the policy came to fruition. Other people who got endowment mortgages in later years, or from different sources, may not have such pleasant stories. It's all a gamble, really - but, with the best information you can take the best decision.

 

[My Name is URL]

Let us know how you get on Tek, I have some friends in London looking to buy and saving hard for a deposit. Will let them know about this but same as you, i'd like to know a little more.....

 

[John Marwood]

I seem to have posted after perhaps sampling a little too much port wine

I cannot even understand it myself today

I can only apologise and hope for a tinternet breathtest sometime soon

 

[tek-monkey]

I'm a CeMAP qualified mortgage adviser, and I wouldn't touch any shared equity scheme with a bargepole. This is not professional advice however, just my own preference. An Englishman's home is his castle, etc, etc....

Any pitfalls you could see for someone in my situation? Isn't owning 60% of something (if I can easily afford it) better than owning 0% and renting all my life?

 

[tek-monkey]

Gave them a call, 10 week wait to see anyone. Seems that there are limits on what you can buy though, you are only allowed one bedroom per person moving in! Means if I want a 3 bed place, I need to move 2 people in with me. Shouldn't be a problem, but an interesting idea.

Put my name down anyway, can have a chat when it happens.

 

[My Name is URL]

Website is now down..... not sure why at the moment.

 

[Gramaisc]

Works for me at the moment - but then I am allowed to watch RTÉplayer, so perhaps you have to be a special person.

 

[tek-monkey]

I can't see it at college, tried on Friday and today, yet can access it from home without issue. God knows why, DNS issue?

 

[My Name is URL]

Working for me again now....