Proportunity - An alternative to the Help To Buy Scheme (Non 1st time Buyer)?

Scorpiogal13

Just came across the Proportunity website.

They provide an equity loan scheme very similar to Help To Buy.

For someone who isn't a 1st time buyer and who doesn't qualify for a regular £300k mortgage, getting an equity loan did seem appealing to me.

That is, until i read the small print in this Example: (Please excuse the grainy image.)

Please share your thoughts.

Illustrative starting monthly payments assume an 80% LTV mortgage @3.31% 2 year fixed rate repaid over 30 years, plus a 15% LTV top-up second charge mortgage @8,49% 5 year fixed rate interest-only.

These are compared to the starting monthly payments of a 95% LTV 5 year fixed rate mortgage @3.99% repaid over 30 years (interest rates as of Oct 2020). A second charge interest-only mortgage of £60,000 payable over 7 years would require 60 monthly payments of £424.50 and 24 monthly payments of £504.50.

This is based on an initial fixed interest rate for 5 years at 8.49% and then 10.09% variable (Bank of England base rate, currently 0.10%, plus 9.99%) for the remaining 2 years.

Assuming that the home value increases by 0.5% per annum (current CPI) then at redemption in year 7 the shared equity amount due is £62,132. The total amount payable would be £100,309 (loan amount including a £499 product fee paid upfront, plus £37,578 interest and a £100 redemption fee). The overall cost for comparison is 9.6% APRC

dimbo61

Wow sounds very expensive borrowing

ACG

dimbo61 said:

Wow sounds very expensive borrowing

Is it cheaper than renting though? 

Scorpiogal13

ACG said:

dimbo61 said:

Wow sounds very expensive borrowing

Is it cheaper than renting though? 

That's the thing.

I rent at the moment, and my situation might mean i have to spend another year in my rented house - so i can save up enough of a decent deposit.

Which is why i was seriously thinking of enquiring about this Equity loan scheme.

The rates just seem a bit too high though.

K_S

@scorpiogal13 In my previous role, I have interacted closely with the folk that set up Proportunity. The main mortgage is usually with a high-street lender, it's only the equity loan part of it which may be more expensive.

Without going into too much detail, it's a not a 'scam' just somewhat similar scheme to the help2buy equity loan. It can be a useful way to get on the ladder for the right folk who are fairly confident of being able to remortgage to a standard setup in a few years.

Scorpiogal13

K_S said:

@scorpiogal13 In my previous role, I have interacted closely with the folk that set up Proportunity. The main mortgage is usually with a high-street lender, it's only the equity loan part of it which may be more expensive.

Without going into too much detail, it's a not a 'scam' just somewhat similar scheme to the help2buy equity loan. It can be a useful way to get on the ladder for the right folk who are fairly confident of being able to remortgage to a standard setup in a few years.

Yes, i was thinking this too.

Surely, it would be a matter of totally paying off the Equity loan first (within the 1st few years), while paying the mortgage at the same time.

I would have a 10% or 15% deposit though (instead of 5%), so would the rates fair much better?

K_S

Scorpiogal13 said:

K_S said:

@scorpiogal13 In my previous role, I have interacted closely with the folk that set up Proportunity. The main mortgage is usually with a high-street lender, it's only the equity loan part of it which may be more expensive.

Without going into too much detail, it's a not a 'scam' just somewhat similar scheme to the help2buy equity loan. It can be a useful way to get on the ladder for the right folk who are fairly confident of being able to remortgage to a standard setup in a few years.

Yes, i was thinking this too.

Surely, it would be a matter of totally paying off the Equity loan first (within the 1st few years), while paying the mortgage at the same time.

I would have a 10% or 15% deposit though (instead of 5%), so would the rates fair much better?

@scorpiogal13 in theory, yes. I think the minimum overpayment is 10% of the total loan amount and they have some restrictions on how many repayments they can accept in a year on the equity loan part.

With a 10-15% deposit, you could try and keep the equity loan part of it to the very minimum required and that should certainly unlock better rates than with a 5% personal deposit.

ts21

So I was looking at this before the 95% mortgages came back. I did some fag packet maths and if the mortgage rate would be similar to HTB mortgage rates you could actually potentially end up better off with Proportunity than with a 95% mortgage - I haven't re-done the calcs with the current rates though.