Getting onto the housing ladder is not exactly easy.
According to data from the Office for National Statistics , the typical deposit put down by first-time buyers in March came to a whopping £44,000.
Little wonder then that so many would-be homeowners are reliant on a helping hand from their parents or grandparents just to get a deposit together ‒ a recent study by Legal & General suggested that the Bank of Mum and Dad will shell out a mammoth £6.3billion in loans this year.
But what if you could buy a house without the need for a huge deposit? And without a mortgage at all?
That’s where Unmortgage comes in.
Buying a house without a mortgage
Unmortgage is offering a slightly different version of shared ownership. Essentially it pairs you with a ‘funding partner’ in order to purchase a property.
You stick down 5% as the deposit, while the partner pays the rest.
You then pay rent on the chunk of the property that you don’t own, with the option to overpay on the rent whenever you like.
You can increase your stake in the property by up to 5% a year, up to a maximum of a 40% ownership.
Once you’ve reached that point the idea is that you'll be in a position to get a traditional mortgage and purchase the property outright from your funding partner.
Where is the money coming from?
Unmortgage has partnered with Allianz Global Investors , part of the Allianz Group, to help bring in the funding for the various property purchases.
Allianz GI is an investment manager ‒ people with stacks of cash looking for a return hand it over to them to place in different assets across the globe, and property is often a popular option.
So once a property has been identified, Allianz will sort out where the other 95% of the purchase price comes from.
As for your deposit, it needs to be at least £12,500, so you’ll still need to save a decent chunk of money.
You’ll also need a decent credit score and a household income of at least £30,000.
It’s important to note that you and the funding partner will both be responsible for coughing up the stamp duty too, based on your stake in the property.
So if you are putting down a 5% deposit, you’ll have to pay 5% of the stamp duty bill to boot.
What homes can I buy with Unmortgage?
Unsurprisingly, not all homes will fit with the Unmortgage model.
Its investors want to put their money into properties that are going to rise in value over time, and to improve the chances of that happening Unmortgage has laid out some basic criteria for what it will ‒ and won’t ‒ consider.
For example, it won’t help with the purchase of new-builds, homes on main roads, motorways or that back onto railway lines, homes with “unfairly sized bedrooms”, basement flats, flats above commercial property or ex-social housing.
Unmortgage has laid out specific things for what kinds of properties will tick your boxes but also appeal to the investors.
Be located in quiet, urban areas
Have no foundation problems
Be ready for you to move in
Have between two and five nicely sized bedrooms
Be freehold, share-of-freehold or leasehold with a lease of at least 100 years.
Making the home your own
Once you purchase the property, you can make whatever aesthetic changes you like, whether that’s painting the walls, changing the carpet or some other design amendment.
You won’t be able to make any structural changes though ‒ so you can't stick in a conservatory for example.
Moving on from the property
Unmortgage makes it very clear that once you have bought the property with its funding partner, you can stay as long as you like so long as you keep up with those rent payments.
So as long as it meets your needs, you don’t need to move on.
That said, there may come a time when you want to move but don’t want to buy out the funding partner.
Once you notify them that you want to leave, the partner then has three months to decide whether they want to purchase your stake or sell with you.
You’ll have to stump up £350 towards valuation costs of the property, and then split any resulting selling costs based on your stake in the property.
Is Unmortgage right for me?
There will no doubt be some buyers for whom this sort of model appeals.
You only need to get together a relatively small deposit to get a first step onto the housing ladder, and there will be some reassurance in the fact that the investors stumping up the majority of the cash aren’t going to want to be investing in a house that’s likely to crash in value.
But there’s no denying there are some restrictions you are going to have to deal with, from the type of property you can buy in the first place, to denying you the chance to adapt the property as you see fit.
And let’s be honest, there will be some buyers who are a bit uneasy about a faceless ‘funding partner’ stumping up the majority of the purchase price.
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