For first-time buyers trying to get on to the property ladder, the prospect of securing a mortgage can be intimidating.
But a new scheme from Wayhome, launching soon in Milton Keynes, allows you to buy your own home without a mortgage.
The no debt, part own, part rent route to home ownership is designed for those who can’t afford to buy, but who can already afford to rent the type of home they’d like to own.
So potential buyers become partial homeowners, and they have the option of building up their share of the property over time. They could then even eventually buy it outright.
But is it a happy halfway house for potential buyers?
Nigel Purves, Chief Operating officer explains: “At Wayhome, we want to help aspiring homeowners take their first steps away from conventional renting and towards homeownership, helping them to buy a home of their own in an area they love.”
“We arrange a partnership between customers and our funding-partners to buy the home together, in cash. When you pay for five per cent, they pay for 95 per cent.”
Once you’re in your home, you can make it yours. Paint the walls, hang up your favourite pictures and get your pets settled in. You then pay rent to the funding-partners for the share of the property that you don’t own yet.
First time buyers need a 5 per cent deposit, or minimum of £12,500 to be eligible.
With Wayhome, the minimum property value is at least £250,000. The maximum deposit that can be put down through the company is capped at 20 per cent.
There’s also a minimum household income that you’ll need to have in order to buy through Wayhome.
Mr Purves adds: “Aspiring homeowners need at least £30,000 household income, before tax.”
The rent for the remaining part of the property is calculated by looking at similar properties in the same area, in this case Milton Keynes.
Mr Purves adds: “We use a third party to ensure the rent is fair. We can then understand the area and identify the best homes for the customer and ensure they are not paying over the odds.”
“We’ll also make sure the properties suit our customers’ needs from day one. Homes we help them to buy won’t need any big structural changes, so they can move in straight away.”
Those that want to buy through Wayhome are only required to pay the rent on the amount of the home they don’t yet own, so if you already own five per cent of the property, they pay 95 per cent of the rent.
Mr Purves adds: “We make sure that the rent payments on day one are no higher than 36 per cent of their joint household income because we don’t want to overburden our customers with high rent.”
But is this type of option right for everyone?
Which? have highlighted some important details around stamp duty, which potential buyers should know about and understand before they buy through Wayhome.
Firstly, a scheme like this means buyers pay more stamp duty than a normal buyer would.
Which? explains, “Normally, first-time buyers in England are completely exempt from stamp duty when buying a property costing up to £300,000, and a discount applies on purchases between £301,000 and £500,000.”
This exemption does not apply with a scheme like Wayhome and due to the fact that you’re buying with an investor, a three per cent surcharge would apply.
However, when buying, you only pay the stamp duty on the share you own at that point. If you buy five per cent of the house, you only pay five per cent of the stamp duty at that time.
Which? says, “As you buy more shares within the first five years, you’ll also pay the investor back proportionately for the stamp duty they originally paid.”
Mr Purves adds: “It’s important that prospective customers feel comfortable they understand how this new route to home ownership works and the commitment involved in buying a home in this way. We’re aware that we’re not for everyone, and that if a more standard mortgage arrangement works for them then they should consider that first. But if they’re interested to explore what kind of homes they could buy with our help, they should visit our website.
Further information can be found on the Wayhome Facebook page.