Property fund offers 95% deal to FTBs
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The Mill Group is launching what it claims is the UK’s first property investment fund, offering investors the opportunity to invest in residential property by financing first-time buyer deals up to 95% LTV and removing their need for a mortgage.
The specialist property and finance group is looking to raise at least £100m through its Investors in Housing Fund.
Home buyers will be asked to purchase 5% of the property and the Investors in Housing Fund will facilitate the purchase of the remaining 95% of the property without a mortgage lender.
Instead of a mortgage the buyer will pay a monthly co-investment charge, which will be comparable to the cost of servicing mortgages at similar or lower LTVs and designed for buyers who are intending to stay in the property for at least five years.
Stamp Duty would also not be payable by the home buyer when they buy their initial 5% of the property. In five to seven years the home buyers are expected to buy out the fund, providing an exit for investors.
At this stage the borrower could choose to get a mortgage on the remainder of the property with a mortgage lender.
The Mill Group says the No Mortgage Co-investment model is particularly suitable for those in higher managerial, professional and administrative careers, who are seeking long-term, secure homeownership and whose income is likely to increase over the medium to long term.
David Toplas, CEO of Mill Group, says: “The deposit requirements for first-time buyers have reached impossible levels with the average in London exceeding 20%. It’s no wonder they are also on average 37 years old.
“Co-investment aims to bring institutional investment into the market by giving consumers the ability to get onto the housing ladder quicker than saving for these levels of deposit.
“For investors it offers a realistic way of investing in the residential market while earning attractive levels of income and participating in future forecast growth.”
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Readers' comments (11)
Anonymous | 31 Jan 2011 12:45 pm
Am I the only one completely baffled by this?
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Anonymous | 31 Jan 2011 4:00 pm
If it's too good to be true
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ADRIAN HIBBERT | 31 Jan 2011 9:13 pm
Where do I sign !
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Anonymous | 1 Feb 2011 5:14 am
This is a terrible deal for the hapless investor:
(1) He is not the owner, but is responsible for all maintenance and upkeep
(2) How will the buyout price be set in 5 to 7 years ?
(3) What if the property falls in value instead of rising ?
(4) At the end of 5 years after all his payments, he still only has 5% as at the first day.
This is a lot more risky than buying on an interest-only mortgage. The only people likely to benefit are the arrangers and managers, who will take fees from both investors and purchasers.
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Nick | 1 Feb 2011 5:44 am
When you start having to juggle your finances with a scheme like this, you know you are paying too much for property that is overpriced. So will investors be pleased when in 7 years time, property prices will have halved?
Sounds like a recipe for disaster. Don't get involved with a third party regarding anything to do with your finances.
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Bay Roulger | 1 Feb 2011 6:44 am
Whay would any 'buyer' go for this deal? It's not clear from the article, but I presume that the first time 'buyer' would only get 5% of any upside (if prices go up over 5 years), and would have to buy out the 'investors' at the new higher price? All the risk of buying a house, with none of the upside - why would you go for this rather than renting?
Utterly stupid.
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David barker | 1 Feb 2011 10:56 am
What happens if the FTB defaults? How does the investor know that you are not paying 95% of a fantasy valuation? No tax relief on gearing aka BTL or will the fund gear up? Whats to stop the FTB walking away in 5 years if property prices are lower???
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Anonymous | 1 Feb 2011 11:07 am
Unbelievable, will they stop at nothing to shaft FTB's. House prices are going to tank anyway, chances are investors will lose too, or shaft the FTB's even more if they're protected. I suppose the Mill group would take their cut either way. utterly dispicable.
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Anonymous | 1 Feb 2011 2:34 pm
Where did this figure about the average age a first time buyer come from? If it really is 37, he or she was 27 in 2001, when prices were half what they are now....so why didn't he/she buy then?
Oh, and I fail to see how buying 5% of a house's value for a 5% stake is better than paying 20% for a 20% stake! Especially as house prices are about to plummet, and in 5 years' time the buyer will be liable for the other 95%!
Ludicrous!
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David | 2 Feb 2011 2:02 pm
I’m not sure what all the fuss is about. I think what this is addressing is the dire shortage of mortgages, especially for FTB’s and especially for those who have not got £40k or so sitting in a bank account to use as a deposit – do you??
For an investor, if I understand this, they own 95% of a property and, like any other property, it can go up or down – meanwhile they get a monthly income from their investment. Nothing new there!
For the FTB, I think, it’s a chance to get on the property ladder with a small deposit and, while living in the home of their choice – can save to buy more of their home as and when they are ready. Seems a lot more secure than renting! And they have no risk of negative equity, as there is no loan involved.
Time to wake up to the fact that it’s a different world out there – getting a 20% stake is out of reach of most people. Rents are rocketing and offer no security. If this offers security of tenure, lets FTB’s start to own their own home and works for an investor then I think it has to be worth considering. It’s new ideas like this that might just get the housing market moving!
Oh, and the average age of a FTB who has no parental support is 37. Where were you when you were 37!!
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