Will Joint Equity be the key for first-time buyers or should they hold out for the Help to Buy Isa?

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Iona Bain

A new investment initiative is being launched for people who cannot afford to buy a home outright. The Joint Equity scheme comes just weeks before the Government’s Help to Buy Isa goes on sale, adding to a growing menu of options for first-time buyers.

A spin on the shared-ownership model, it allows private tenants to buy a home with only a 5 per cent deposit and a mortgage worth 45 per cent. The rest of the equity will be supplied by bondholders, who will receive a return rising from 4.5 per cent to 6.5 per cent over the product’s 25-year term.

Over time, buyers will pay back their mortgage plus an interest charge.

Available for homes worth under £250,000, a pilot for Joint Equity has been running over the past five years – and has helped 21 buyers get a home in Bedfordshire, Buckinghamshire and East Anglia.

Under the scheme, the homebuyer will see an independent mortgage adviser who considers all the options with them, including whether they can raise a 100 per cent mortgage elsewhere or qualify for housing association homes.

Meanwhile the bonds will be managed by a company called Ingman Capital Partners, which is regulated by the Financial Conduct Authority (FCA). It plans to raise £3.5m in a “mini bond” to allow between 48 and 50 properties to be purchased, with more bond issues to follow.

Patrick Connolly of the adviser Chase de Vere describes the mini-bond as “very interesting”, but he also points to a downside: “The buyer potentially faces a mortgage arrangement with higher interest rates and less flexibility than could be obtained elsewhere.”

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