Home Generator Scheme

Have been looking around at new builds in our area and came across something called the 'Home Generator Scheme' from one developer.

You can read about this on the Davidsons Group website - www. davidsonsgroup.co .uk /buyers-guide /homegenerator

But to give you a rough idea...
Home Generator is a special scheme which enables you to buy a Davidsons home without having to pay the full price at the beginning. Just arrange your own finance on 85% of the house price and Davidsons will fund the remaining 15% with a deferred Home Generator loan. You pay this back either when you sell the property or after 10 years, whichever comes soonest.

Home Generator is not a shared ownership scheme, you own 100% of the home from the beginning (a second mortgage will be taken over your home to secure your Home Generator loan).

Your new Davidsons home costs £160,000 so you raise a first mortgage for £136,000 (85%) from your lender. We lend you the remaining £24,000 through Home Generator.

If you decided to sell the property after 8 years and its value had increased to £170,000, then the Home Generator payment due would be £25,500. If, after you had owned the home for two years, the property value had fallen to £150,000, then the Home Generator loan due would be £22,500.

As with any 'scheme' i am very skeptical of any long term issues. So, apart from the obvious '2nd mortgage', are there any other pitfalls or issues i should be aware of with this kind of arrangement? or with any other similar arrangment that developers are offering?

Replies

  • SuarezSuarez Forumite
    970 Posts
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    The obvious pitfall being that the house is worth £120k so you will be in negative equity straight away...
  • kingstreetkingstreet Forumite
    37K Posts
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
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    They've forgotten to make an allowance for a deposit.

    If they are offering a loan of 15%, the mortgage lender will want you to put down at least 5% yourself, possibly more, borrowing a maximum of 80%, not the 85% they mention.

    There is no lender offering a "no deposit" option.

    As this is a newbuild scheme, be prepared for a drop in the value as soon as you move in and instant negative equity. Over the longer-term, the price should recover, but your chances of selling in the short-term, should this be necessary, are probably slim.

    Shared equity options like this normally involve payment of interest on the second charge from year six onwards. This doesn't mention it, so check if it applies and if it doesn't that the lender will be happy with the offer.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Suarez wrote: »
    The obvious pitfall being that the house is worth £120k so you will be in negative equity straight away...

    Where do you get 120K from? or are you simply insinuating that it will not be worth the price they are asking?
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