First-time buyers – a new mortgage-free option?
First-time buyers would then "co-buy" a property with the investment fund, with the aim of buying the fund out within five to seven years.
Buyers would need to purchase 5% of the property – which is not currently accepted by most mortgage providers as a deposit -and the fund will facilitate the purchase of the remaining 95% of the property.
No Stamp Duty would be payable by the first-time buyer.
In five to seven years, the home-buyers are expected to buy out the fund, providing an exit for investors in the fund. But during that period, if the Buyer’s private circumstances change and the property needs to be sold – the fund would buy the entire property.
There are costs, in that the buyer would pay a monthly co-investment charge, rather than a mortgage payment. This would be comparable to the cost of servicing a similar mortgage – if first-time buyers with only 5% deposits could get them.
An example reported would be where, a first-time buyer purchasing a home worth £300,000 would pay a deposit of £15,000. The monthly co-investment charge would be £1,655 – similar to a 90% three or five-year fixed repayment mortgage at £1,745.
However, as with all financial products, professional financial advice should be sought, and the full market of products considered.