Generation Home, the innovative start-up mortgage lender, has launched a full range of first-time buyer mortgage products that include its unique Income Booster and Deposit Booster features. These offer new ways for families to support their loved ones into homeownership in a manner that is convenient, secure, transparent and tax-efficient.
The Deposit Booster product lets parents (or other family and friends) invest into their child’s home. The money is still theirs – it is secured against the property – and Generation Home acts as their agent for repayment of the funds. The buyer is still eligible for first-time buyer Stamp Duty relief, so no more tax is payable than if the funds were gifted.
Customers can choose to structure the investment as an interest-free “deposit loan”, or as an “equity loan” where the amount repaid tracks changes in the house price. The investment can be gifted in whole or in part at any time, while repayment can occur in a number of ways, including by remortgaging once the homeowner has built up enough equity in their property.
The Income Booster product, on the other hand, provides a way for family to go on the mortgage to improve what the homebuyer can afford. The Booster can make regular payments (“active”) or just be on standby to help (“passive”), but if they make repayments they earn shares in the property. The Booster will often be committed to the mortgage for less than the full term, providing the homebuyer with “lift-off” before dropping away. Boosters can apply to come off the mortgage where the homeowner’s earnings increase.
Generation Home provides the technological and legal infrastructure to support fractional ownership of a property, alongside tools that empower the owners to track and manage their home finances. The Generation Home ledger ensures fair division of ownership in the property where participants want to manage their finances separately. Examples include unmarried couples keeping their finances separate, siblings or friends owning together, or parents providing repayment support for a mortgage.
Each pound put towards the deposit and mortgage repayments is captured and reflected in each individual’s stake in the property. So, if you’re paying more, you are issued with more shares in the property. Repayments can be made from multiple bank accounts with the payment split controlled by the borrowers. Customers can track their ownership and gift or trade-in shares with one another.
Generation Home co-founder and CEO William Rice said: “We created this business with the goal of improving the financial prospects of our generation. The solutions that we offer open up new avenues for inter-generational support and bring homeownership within reach for millions of people who thought that they were locked out of the market.”
There is huge pent-up demand from families to help. The company’s own research has found that over 60% of parents would be willing and able to provide greater deposit support to their children if they did not have to gift the funds. The respondents’ proposed investment amount was more than double what they had planned to gift.
Generation Home co-founder Sophia Guy-White, added: “We don’t lend to landlords and we never will. This is an important statement for the team at Generation Home because we want first-time buyers to know that we’re fighting their corner.”
Common reasons provided for withholding deposit support included concern around the longevity of a child’s relationship (the “dodgy boyfriend” conundrum), needing the funds in retirement (“financial stability”), a principled aversion to gifting (“a leg-up not a hand-out”), and the need to help multiple children onto the ladder (the “fairness challenge”).
For now, products are only available to customers who apply to Generation Home directly. The lion’s share of applications received to-date have come through Instagram, with early customers having already made the journey all the way from an Instagram click to the front doors of their new homes. However, the company is working hard to open up its products to independent mortgage advisors as soon as possible.
William Rice added: “We recognize the importance of high quality, independent advice to many first-time buyers and we want to give this option to our customers as soon as possible. We’re delighted to be partnering with the Legal & General Mortgage Club to build relationships with the broker community. L&G shares our drive to build a housing market that works for more people.”