Head Start scheme (David Wilson Homes)

leewigan

Does anybody have any advice regarding this scheme?
It's where DWH give you a 10 year interest free loan for 15% of the property value.
The catch is that when the loan is repaid, the repayment cost is 15% of the property value at that time so if the house is worth more, I have to pay them more.

I am quite sceptical about this but as a 2nd time buyer who cannot come up with the 10% deposit that I require, this is an option that is available to me.

david29dpo

Sounds fine, however, how much do you pay back if the house drops 15%?

Emmzi

is it at all possible the house is overpriced by 15% and they are covering the gap between their price and a valuation report?

Just a thought...

I'd rent and save.

tizerbelle

The thought of this scheme worries me.

If you can't come up with a 10% deposit now, what makes you think that after 10 years (with all the other home-ownership related and general living costs) makes you think you would have the 15% needed to pay off your loan. What if instead of being 15% of 100,000 now for example, in 10 years it becomes 15% of 200,000?

How will you know you have ever saved enough to repay this 15% when the goal posts are constantly moving?

Also how will the 15% be calculated - you say in your OP it will be based on the property value - who's going to decide what that is? We all know houses are only worth what someone will pay for it and if the house isn't being sold and the 15% based on the agreed selling price and not the asking price - then I'm guessing the property value is going to be over-inflated.

If it were me, I wouldn't touch this with a bargepole.

kiki*_2

I looked at this scheme but what worried me was that there were only 2 banks that would give you a mortgage for it and if I decide I wanted to move banks I couldn't. In the end I did a 95% mortgage on a house that wasn't new build as I clearly got more house for my money.

leewigan

david29dpo wrote: »

Sounds fine, however, how much do you pay back if the house drops 15%?

If the house value drops, you would end up paying back less as it would be 15% of the value at that time.

leewigan

tizerbelle wrote: »

The thought of this scheme worries me.

If you can't come up with a 10% deposit now, what makes you think that after 10 years (with all the other home-ownership related and general living costs) makes you think you would have the 15% needed to pay off your loan. What if instead of being 15% of 100,000 now for example, in 10 years it becomes 15% of 200,000?

How will you know you have ever saved enough to repay this 15% when the goal posts are constantly moving?

Also how will the 15% be calculated - you say in your OP it will be based on the property value - who's going to decide what that is? We all know houses are only worth what someone will pay for it and if the house isn't being sold and the 15% based on the agreed selling price and not the asking price - then I'm guessing the property value is going to be over-inflated.

If it were me, I wouldn't touch this with a bargepole.

The thought also worries me which is why I wanted some advice. What their financial guy said is that you could re-mortgage after 9 years and 11 months. If house prices have risen (which you would expect so after 10 years) you can use the equity in the house to pay the loan back.

I'm 95% sure I will not go with this scheme. I think I could stretch to 10% deposit with a 5% deposit match from them. This would be easier to get an 85% LTV mortgage yes?

tizerbelle

leewigan wrote: »

The thought also worries me which is why I wanted some advice. What their financial guy said is that you could re-mortgage after 9 years and 11 months. If house prices have risen (which you would expect so after 10 years) you can use the equity in the house to pay the loan back.

And what was one of the causes of the biggest banking collapse ever seen that we are now suffering the consequences of? People treating "equity" as a cash cow to fund their lifestyle. Ludicrous advice (bordering on downright dangerous) but on par with any non-independent sales person. He will no doubt be on commission so will say anything to get you to sign up - he won't care about the problems you might get in later.

leewigan wrote: »

I'm 95% sure I will not go with this scheme. I think I could stretch to 10% deposit with a 5% deposit match from them. This would be easier to get an 85% LTV mortgage yes?

Do yourself a favour and make it 100% certain that you will not use this scheme - not even for 5%. If I remember rightly, mortgage companies will want to know where you got your deposit from and if it's based in whole/part on a loan (of any type) they will factor that in to their decision. So it wont be any easier to get a mortgage.

You are better off seeing how you can cut your current expenditure, staying where you are and saving hard to build up a decent deposit and legal fees fund.