The lowdown on alternative home ownership options – an explainer

The lowdown on alternative home ownership options – an explainer

 

Mortgage Solutions has spoken to providers who are working or planning to work with mortgage advisers to help them place clients struggling to buy a home through the mainstream routes.

 

Generation Home

Generation Home is a mortgage lender which was launched by husband and wife Will Rice and Sophia Guy-White last year through Legal and General Mortgage Club. It expects to be available to all brokers this year. 

It offers a product like the joint borrower, sole proprietor (JBSP) mortgage which allows family and friends of a homeowner to act as a guarantor and make optional payments towards a mortgage.  

People who join the mortgage can choose to stop making payments at any time and can take themselves off before the term ends. 

It also offers a ‘DIY Help to Buy’ which allows people to contribute to a borrower’s deposit in return for equity. 

When the property is resold, Generation Home acts as an agent to give everyone their share. 

The firm is backed by institutional funding, including Natwest. 

It recently launched 95 per cent loan to value (LTV) products with rates beginning from 3.78 per cent for a two-year fix with a £999 fee. 

It will accept employed and self-employed borrowers, those receiving pension, rental and investment income as well as commission or overtime. 

 

Ahauz

Adam Ginty, head of marketing, described Ahauz’s product as a “private version of Help to Buy”. 

Launched in September 2021, Ahauz will lend against existing and new-build properties in England and Wales. Ginty said there was a growing number of lenders accepting the Ahauz loan as part of a borrower’s deposit. 

The loan has rates between 6.99 per cent up to 9.99 per cent depending on property value, and there are no early repayment charges (ERCs). Repayments are made on an interest-only basis, and borrowers must demonstrate how they will pay off the loan which matches the term of the mortgage. 

The initial rate is fixed for five years before it reverts to a standard variable rate. Borrowers are able to refix if they choose. 

Ahauz has worked closely with brokers to help shape its proposition and has partnered with some advisers since its launch. 

Borrowers must have a minimum income of £25,000 and Ahauz does not lend against buy-to-let, houses in multiple occupation (HMO) or semi-commercial properties. 

It will lend up to 25 per cent of a property’s value and borrowers must put in a minimum of five per cent. 

If the value of a property changes, the value of Ahauz’s share fluctuates to reflect this. 

 

Even

Even is a second charge lender which provides interest-free equity loans. It was launched by Matt Robinson and James Turford, co-founders of estate agency Nested last year. 

It describes its loan as similar to Help to Buy but is only available on pre-owned properties. Even can provide loans up to twice that of a buyer’s deposit up to a maximum of £100,000. 

Even does not charge interest because in return for the loan, it holds a stake in the property. The share changes along with the property’s value and is factored in once the loan is repaid. 

Even caps the profit made on its share by twice the amount of the original loan if this is repaid within 10 years. The limit rises to three times if the loan is paid back after 10 years. 

There are no early repayment charges. The owner also keeps any increase in value resulting from structural renovations.  

Even aims to serve first-time buyers who do not have family help and would prefer to buy a pre-owned home in England or Wales.   

It has a private financing facility to originate its loans. This is secured for the customer, so the loan is protected should anything happen to the firm.  

It is currently working with Kensington Mortgages as a first charge lender to deliver its loan and hopes to partner with more first charge lenders to broaden choice. 

The term of the loan fits with the first charge mortgage and each month, the customer pays off some of the capital loan amount..  

It does not accept people with adverse credit, individual voluntary agreements (IVAs) or county court judgments (CCJs). It requires borrowers to have at least a five per cent deposit and be in the market for a mortgage that is 4.5 times their income. The minimum income allowed is £20,000 and the first charge mortgage must be between 75 and 90 per cent LTV. 

Even’s contribution combined with the customer’s deposit cannot exceed more than 25 per cent of the property value. 

 

Proportunity 

Proportunity is an intermediary-only lender run by co-founders Vadim Toader and Stefan Boronea. 

It offers shared equity second charge mortgages aiming to boost borrower’s deposits up to 95 per cent LTV of a first charge mortgage when combined.  

It has a Proportunity Home Index (PHI) algorithm to help buyers to find properties which are “fair valued or undervalued”, and these are the homes it will lend against.  

It is designed to be similar to the government’s Help to Buy scheme but with fewer restrictions. Loans can be used on existing homes as well as new builds, and borrowers do not need to be first-timers. They will own 100 per cent of their home.  

The interest rate of the loan varies between 5.99 per cent and 8.49 per cent, depending on circumstances and property type. 

It said its rate was comparable to Help to Buy when factoring in the condition that the government scheme’s loan does not need to be repaid for the first five years.   

“Having said that, our cost needs to be compared with the premium that a customer is paying when buying a new build,” Toader said. 

Proportunity can provide a loan up to six times income with a five per cent deposit. 

It accepts those with good credit scores who are either employed, self-employed or key workers.  

It launched in 2018 and its debt fund includes a range of private and institutional investors. It recently expanded its funding facilities to be able to lend £100m by the end of 2023. 

The firm’s growth and salaries are funded through venture capital partners while debt funding lines are used exclusively for lending from institutional lenders such as asset managers and commercial banks. 

The loan term matches the term of the main mortgage and has a fixed rate for the first five years. Customers can refix after five years. 

Monthly payments are interest-only. If the property value increases or decreases, the buyer and Proportunity share the gain or loss. 

It cannot be used for buy-to-let or houses in multiple occupancy (HMO) purchases but it does permit lodgers and allow borrowers to have buy-to-let investments in the background.  

Proportunity accepts both old and new builds, flats and houses. It will run all properties through its proprietary technology to assess its ‘credit worthiness’. If it finds the property is significantly overpriced, it will not lend.   

It also does not lend on properties sold at auction, ‘cash buyers only’ homes, or shared ownership properties. 

 

Wayhome

Wayhome aims to cater to “reluctant renters” who can afford mortgage payments but are unable to raise a deposit. 

It is gradual homeownership proposition, similar to shared ownership, which allows customers to increase their equity in a property from as little as £50 at a time. 

Cal Graham, head of marketing, said: “Obviously, if you’re only going to buy £50 of your home, your rent is not going to come down very much. The idea is if you’ve got a bonus from work, and you have a couple of thousand pounds, you might put that into your home.” 

Wayhome acts as a cash buyer for a property then charges the customer market rent on the share it owns. Borrowers pay legal fees, stamp duty and surveyor fees relative to the share they own. 

Any additional shares purchased will be valued at the current price of the home and Wayhome does not charge fees to staircase. 

It also splits maintenance costs with the tenant depending on the share it owns, meaning for a home where Wayhome owns a 90 per cent stake, it pays for 90 per cent of repair costs. 

Borrowers with household incomes between £24,000 and £140,000 will be considered and it lends to those aged between 21 and 55. 

Deposits between five and 30 per cent are required at a minimum value of £7,500. 

It will lend on houses or flats, but not new builds, with values between £150,000 to £500,000. 

It does not accept borrowers with adverse credit, but it does consider those who are self-employed with one year of accounts. It is also Shariah-compliant. 

Wayhome will only purchase homes where it can make a four per cent yield on rent. It caps how much it allows homeowners to pay in rent to keep it affordable. 

It is preparing to build relationships with brokers to distribute its product and so far, has approached speciality advisers. Wayhome said it will offer “industry-standard” proc fees of 3.5 per cent. 

 

Tembo 

Tembo is a mortgage broker headed up by co-founder and owner Richard Dana. It acts as a marketplace for family boost mortgages, equity loans and gradual ownership schemes. as well as traditional mortgages and protection. 

It will connect clients to alternate routes to home ownership including the aforementioned companies. 

Additionally, due to mortgage adviser interest, it recently launched a partnership platform with independent financial advisers (IFAs), brokers and equity release providers to place cases which have been denied due to affordability or deposit issues. 

Dana said: “Our partners prefer not to advise on these products given the time and complexity in arranging them. If they can arrange three standard mortgages in the same time it takes to co-ordinate one complex family mortgage or equity loan, for many mortgage advisers it simply makes more financial sense to refer to a specialist and share in the commission.” 

Tembo raised its initial investment from Founders Factory, a digital venture investor. It has since raised £2.5m investment directly from Aviva Group.