New Product. What do you think?

[Olly]

Saw this in the Domain section of my local newspaper. I'd never heard of it before. (I've retyped the relevant excerpts.)

It's called the Head Start Shared Equity Loan from Wizard.

"Wizard can help with a revolutionary new product to help first time buyers beat the deposit barrier and get finance sooner in return for sharing the equity in their home.

It works like this: A borrower with a good salary and credit history but no savings can apply - no deposit is required.

To cover the house purchase costs AND the transaction costs, additional funds of between 2 & 5% is available to the borrower.

Once approved the repayment schedule is set up to repay the house purchase costs only. The transactions costs are not repaid until they discharge the loan. This is where the shared equity kicks in.

The borrower repays the transaction costs AND shares a proportion of their capital gains on the property. If they took an extra 2% the lender receives 20% of the CG and so on up to an addition 5% that provides the lender with 50% of the CG.

If there is no capital gain there is no equity to be shared."

Olly

 

[michaelg]

Hi,

Let me see if I understand this...

Instead of buying a house marking it up by 20% and charging a premium for interest, I could instead negotiate and buy below market and then sell just 5% of that discount as a "transaction cost" equity share loan and reap not 20% but up to 50% ???

and they want to ban wrapping?

Regards
Michael

 

[Aceyducey]

There was a bit of a discussion of this loan in the forum a couple of weeks ago.

General view was daylight robbery I recollect.

Cheers,

Aceyducey

 

[XBenX]

Sounds like you need to get back on the campaign bandwagon MG

 

[Jacque]

Methinks Wizard have noticed wraps and the interest they've generated and made a product to suit. So much for the ethical debate.........

 

[Qld's007]

I am not a great advocate of the product seen too much of it in the UK in the 80's and the effects in had on ppl.

I prefer the cocktailing effect of a 90/10 loan with 90% of the loan through a standard lender who allows the balance to be borrowed by way of 2nd mortgage.

Whilst you may a bit more for the 2nd loan if you get the capital growth you can always refinance after a few years.