A Guernseyman is offering investors the chance to make some money while helping him and his partner buy their own home.
Tim Dorey said he has been turned down for a traditional mortgage due to current strict criteria, although the couple say they can prove they are able to make monthly repayments.
Mr Dorey is instead hoping an investor will agree to lend them a sum of money as a short term investment.
His plans include a loan of £200,000 which they will begin to repay immediately at a rate of £1,000 a month, over a two year period. At that point the couple plan to re-mortgage which will enable them to repay the money plus an extra £5,000 for the lenders trouble.
Mr Dorey added that to safeguard the investors money, the couple will allow them to own half of the purchased property until the lender is fully reimbursed.
He said he and his partner have worked out all the finances and are sure this plan will work:
"We recently applied for a mortgage through a reputable mortgage advisor. He applied to several high street lenders who would not consider our application to to minor adverse credit history in 2016 even though now both clear of any debt and with a £150,000 deposit from my partners previous house sale.
"My partner has just started a new business so they would not consider her income for two years. I am in full time employment and originally we were told we could borrow 5.5x my income. Had I not decided to go self employed in 2016; a very bad year for the building industry, I would have had an exemplary credit history.
"Due to these personal circumstances in 2016 it has become impossible to find lending on the island for us. It seems the lender's criteria is very strict and those applying are struggling, some with no adverse credit and good income, We know we are not the only ones who have faced this problem with lenders with regard to the legalities; we would assume that a reputable advocate would be able to draw up a contract suitable to all parties. There are companies in other parts of the world that specialise in this area. If they can do it why can investors in Guernsey not come forward to help families like us. It’s a relatively short investment with an excellent return with a very low risk as the house would be used as collateral ensuring the investor gets their investment back plus their monthly payments of £1000 and £5000 bonus at the end of the agreed term. Off the top of my head that’s approximately a 14% return on the £200,000 original investment. Pretty good if you ask me."
Pictured: Tim Dorey and his partner Zoe
Mr Dorey told Express the idea could lead to other benefits for those involved, as well as his predicted good returns for the investor:
"Firstly investors are buying up the run down properties to make their money work for them, they improve them and sell on, meaning the young first time buyers are missing out. The way we are suggesting would encourage a good return with little to no outlay/intervention from the investor, meaning people like us could afford slightly better housing without the investors risk and loss through having to improve then sell on.
"I am in the building trade and have noticed a trend with people in 2/3 bed houses building extensions, as it’s cheaper than moving, thus pushing that property up into the next housing price bracket. Young families like us would have to have two full time jobs, children at school full time, free childcare, debt free and legal fees in place to afford a low priced three bed house in today’s market."
The couple are looking for what could be considered an average sized property, with plans for it to be their family home:
"We are looking for a three bed property, our budget is £350,000 and with a young family of four children, we are looking for an outdoor space and some parking, which is a big ask in today’s market. We are working class people who want to get onto the property ladder. Our mortgage would cost us less than our current rent.
"Before living together we were paying £2250 a month rent. Our quoted mortgage was £1100 a month; well within our affordability. Currently we are renting a three bed house at a reasonable (for Guernsey) £1400 a month, with garden and parking. Again above our quoted monthly mortgage payment. "
The latest statistics from the States of Guernsey suggest property transactions are increasing year on year when it comes to local market houses. The cost of open market properties has on average fallen slightly:
The mix adjusted average purchase price for Local Market properties was £424,524 in the fourth quarter of 2017, 0.3% higher than the previous quarter and 2.5% higher than the fourth quarter of 2016.
There were 186 Local Market transactions during the fourth quarter of 2017, 14 fewer than the previous quarter but 39 more than the same quarter of 2016.
6.5% of the properties transacted in the fourth quarter of 2017 had been built within the twelve months prior to being sold. 8.7% had been built within the three years prior to being sold.
The raw median price (realty only) of the 18 Open Market transactions in the fourth quarter of 2017 was £1,026,000 compared with £1,087,750 in the fourth quarter of 2016, when there were 13 transac ons.
Recently, one mortgage provider reintroduced 100% mortgages to the market place. Skipton International told Express last week that "now is the right time to reintroduce this product" with the property market in a "good position".
Shane Konken, Mortgage Associate at Skipton International, said at the time: "At Skipton, we have always had a responsible approach towards lending, offering the right products at the right time to ensure that our borrowers never end up in a negative equity position.”
The Next Generation mortgage will require family members to guarantee up to 15% of the purchase price of the property. Skipton can grant loans of up to £500,000, provided the borrower meets Skipton’s standard underwriting criteria. This mortgage product is only available through direct application to Skipton.
At that time, Tim Roberts; director at Shields and Rutland Estate agents, welcomed this development: "We saw a really positive second half of 2017 with regards to the number of sales and we are pleased it is continuing into 2018. It is a positive indicator for the property market in Guernsey."
Responding to his thoughts on the return of the 100% mortgage specifically, Mr Roberts said: "Any opportunity to change lending conditions is positive for those looking to buy a property and the market in general."
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