Floris ten Nijenhuis
How does a home repurchase plan work?
With a home repurchase plan, instead of the bank lending money to the customer to buy a property, the bank purchases the home in partnership with the customer.
In this case. it’s not a bank but a private provider. Rather than paying interest, the customer pays rent on the proportion of the home they don’t yet own and every month they buy up more of the property.
Who owns the property?
At the beginning, you’ll be required to pay a deposit, which will be the amount you own. The private provider will own the rest and charge you rent on it. Over time you will buy more of the property from them whilst continuing to pay rent.
What’s good about Home Purchase Plans?
Unlike the government Shared Ownership scheme, you might find there are no restrictions on who qualifies for this and you can choose any home you like. Also, if you cannot qualify for a mortgage this might be a great alternative.
What to watch out for
One of the biggest things to watch out for is that you are locking yourself into a long term agreement, so make sure you know what happens if you choose to sell the property or to move out and discontinue with the purchase plan. You are unlikely to be able to substitute for a mortgage if you choose to do so in the future, so make sure you are aware of that risk. If you are unsure, speak to a mortgage advisor before signing up.
Also be careful that the amount of rent charged is fair and make sure you ask about how the valuation works when you choose to buy more equity in the property.
Want to read about other alternatives to buying a home with a mortgage? You can find out more here