David Wilson: 'HeadStart' 5% deposit, 15% 'shared equity'

richardsims

Hello,

I was hoping for some advice on the following product from David Wilson Homes. It's part of their Head-Start scheme. I know there have been one or two posts on this forum already where the general feeling was fairly negative:

To summarise, on selected new builds you only need to put down a deposit of 5%, and DWH put up the remaining 15%. You then only need a mortgage of 80%. DWH then place a charge on the property and you have to pay them 15% of the house value when you sell (or you buy them out after 10 years).

As some background we live in Cambridge, and while we have a reasonably high income, we're finding that (based on the rental costs around here) we're struggling to build up a 10% (or even 20%) deposit. This does seem to be an interesting way to circumvent that problem.

However, I obviously have heard the horror stories in the news regarding shared appreciation mortgages in the 80s. (those these aren't quite the same beasts)

A few concerns I have:

1) There are limited mortgages that are offered. Currently the one that we would qualify for is a Halifax, fixed at 4.99% for 2 years, then tracker (currently 3.99%). This is not too bad, but the obvious worry is what happens when the 2 year term runs out? It might be hard to renegogiate due to the limited number of available products.
2) What happens if the house price rises dramatically? Say after 5 years the house price has risen by say 100%. On a £300k house the 15% has then increased from £45k to £90k. However the house value has increased to £600k, and of course there will have been 5 years of mortgage payments since then. Saying that other houses in the area will of course have risen at the same rate. On the other hand are further dramatic house price increases likely?
3) How is the house valued? (I'm still trying to get some answers about this). Obviously the valuation could dramatically change things.

The other option would be the 5% matched deposit scheme that they offer. However 90%LTV mortgages aren't all quite as attractive as the Halifax product.(which I guess has an effective 80%LTV ratio).

Any comments would be gratefully received. Is there a massive disadvantage to this scheme that I'm missing? One interesting point is that if the house prices drop you actually win.

thanks
Richard.

dimbo61

The big problem is that you are
1 paying a mortgage of 4.99% fixed for only 2 years and rates will be higher in 2 years time
2 you have an ? interest free loan which must be PAID BACK within 10 years
Now if you can overpay big style over the next 10 years and build up equity in the property then you can remortgage to repay the builders there 15% ( CAN YOU ? )
You also have the problem that new homes LOSE VALUE once you move in ( a bit like a new car)
Hence the reason why the builder is offering a 15% interest free loan over 10 years
Its a strange market where people cant save a deposit when they earn good money
Do you have an Iphone 4 or 4s or an Ipad2 or gym membership, do you smoke, drink, drive a nice car, holiday abroad twice a year, shop at sainsburys/waitrose/ M&S.
We live a careful life style ie aldi, morrisons ( late at night) drive a 5 year old picasso, go on cheap hols to spain, france, holland, use quido and comparison websites for everything.
Overpay the mortgage each month and hope to be mortgage free before I am 53/54
I also live in a cheaper part of the country ( cheshire) where you can find cheaper properties and a good standard or living !!!

FireWyrm

There are no quick ways out of this conundrum, and David Wilson Homes certainly arnt doing YOU the favour, you can be sure. I disagree with Dimbo on the interest rate rise, I think it'll stay static, but short of a crystal ball, neither of us know for sure.

Just a thought....I couldn't afford a house in Oxfordshire even though it was close to work. My only option was to move further north where I could afford something. However, the rub is that the journey into work is killing me and so is the petrol, therefore, I have to find a new job, it's that simple. Sometimes, you just have to cut your coat according to your cloth and you have to decide what your priorities are. Unfortunately, few ever get to have their cake and eat it. It's a fact of life.

G_M

Why on earth would you even consider this?

Sounds like a great deal.... for DWH!

brit1234

Shared equity is a scam, check out this collection of shared equity horror stories throughout this thread:

https://forums.moneysavingexpert.com/discussion/3177256

Its for the builders benefit to rig their land registry prices higher, thus artificially increasing their land bank values to hide their insolvency.

You get nothing as a buyer apart from ripped off.

poppy10_2

What will you do if you can't afford to pay the 15% loan back in ten years time?

FireWyrm

brit1234 wrote: »

Shared equity is a scam, check out this collection of shared equity horror stories throughout this thread:

https://forums.moneysavingexpert.com/discussion/3177256

Its for the builders benefit to rig their land registry prices higher, thus artificially increasing their land bank values to hide their insolvency.

You get nothing as a buyer apart from ripped off.

Oh knock it off Brit. Your case is weak as you refuse to acknowledge the millions of success stories out there. Shared ownership can work very nicely as the likes of Milton Keynes well shows. It's always a case of caveat emptor and always will be.

brit1234

FireWyrm wrote: »

Oh knock it off Brit. Your case is weak as you refuse to acknowledge the millions of success stories out there. Shared ownership can work very nicely as the likes of Milton Keynes well shows. It's always a case of caveat emptor and always will be.

This thread is shared equity not shared ownership.

Also there aren't millions of success stories out there with shared ownership as there aren't millions of shared ownership properties. Where is the proof of your argument.

Simply comparing all the conditions and costs of a shared ownership verses a normal home will have the shared ownership buyer worse off. If you want we can do the sums right here and have a straight comparison. We could even start a new thread with a vote to see if we catch these millions of shared ownership owners.

Anyway back to the original shared equity thread and away from shared ownership.