homebuy 25%

[tali122]

purely from a financial perspective is a homebuy 25% intrest free loan a good idea?- bearing in mind you have to pay back at house price inflation(ie 100k property that increases to 200k you will pay back 50k) -the homebuy 25% does substantially lower your monthly payments - but is it better to fund a mortgage conventionally ?

[buildersmate]

HomeBuy is a product coming out of the work by Johnnie 2 Jags' old department. It is to help Key Workers initially, social housing tenants and (now) First-Time Buyers to get onto the housing ladder. It is administered through Housing Associations mainly, and is a Shared Equity Scheme. This means that you don't own all the equity in the house that you buy - a funder linked to the Housing Association or the Government own part of the equity. It isn't an interest-free loan as such - you pay the interest / capital repayment on the mortgage for the part of the house that you own, and pay a small 'rent' to the funder for the part that you don't own. Because the rent is less than the equivalent mortgage for say a 25% stake in the property, it makes the monthly repayments more affordable to critical but lower-paid Key Workers / or 1st Time Buyers. But you never own 100% of the house, and when you eventually sell up, part of the equity in the sold house goes back to the funder. If you want to 'buy out' the funder and buy his stake out (you don't have to), not unnaturally you buy at the correct market value of his stake. Its impossible to say whether it is 'better' to fund this way than a conventional mortgage because that entirely depends on future growth in property prices. The purpose in the product is to allow folks who can't start buying a house to at least get onto the ladder.