Critics described the service as a bridging loan better suited to experienced borrowers and said the fees were higher than other mortgage products on the market.
The Habito Go service allows first-time buyers to make a cash offer on a house while they wait for their mortgage of up to 85 per cent loan to value to be approved, therefore “upgrading” their application.
Borrowers will only be charged for the loan if the house purchase is completed, once they are a homeowner. The existing mortgage application will be cancelled and Habito will then convert it into a remortgage application on the same terms.
Estate agents cited concerns about the 1.95 per cent fee on the final agreed property price and 0.5 per cent fixed monthly interest on the loan, which would be applied if the applicant’s mortgage failed to come through on time.
Founder and CEO of Springbok Properties, Shepherd Ncube, said this was “far higher” than a standard variable rate mortgage, while Rob Jupp, CEO of Brightstar said it sounded “extremely dangerous” and “irresponsible”.
Daniel Hegarty, CEO and founder of Habito, refuted these concerns. He said the interest which is calculated daily would only be applicable for the number of days it was needed and would not be rounded up to a full month.
“We feel this is a fair price for Go as a service and the cash advantage it gives buyers in price negotiations,” he said.
He added: “We’ll always be upfront about the costs for each individual before they choose Habito Go and of course, if they don’t end up getting the property they wanted, they don’t pay a thing.”
Similar to a bridging loan
David Conway responded to the article announcing the service, calling it a bridging loan which he said was “a product for people with very clear objectives and understanding of costs”.
Hegarty said the service compared “much more favourably” to a typical bridging loan, which he argued tends to cost 1.5 per cent a month (or 18 per cent a year) and often has additional fees with no services included.
The Habito Go service includes a fast-tracked valuation and legal work in its fees.
However, rates available from many bridging lenders start at around 0.5 per cent per month and according to lender MT Finance, the average monthly interest rate issued in Q2 was 0.79 per cent.
A solution for some
Hegarty agreed that while the service would not be suitable for every first-time buyer, it would be a “great financing option” for those who valued speed, certainty or had previously lost out to cash buyers.
He added that it would only be available to approved Habito first-time buyer mortgage customers and eligibility for the loan depended on their personal financial circumstances and the type of property being purchased.
He went on to say Habito were regulated by the Financial Conduct Authority and had the “correct approvals” to lend.
Hegarty said: “We hold ourselves to the highest standards of integrity and pride ourselves on being clear and transparent, as well as innovative, in making mortgages easier for consumers.”
Update: Since publication, Habito has contacted Mortgage Solutions to clarify that the loan does operate like a bridging loan.