With property prices higher than ever and renters struggling to buy their first homes, a new company has burst onto the scene with promises to change the face of homeownership.
Wayhome (formally known as Unmortgage) is one such company. Read on to learn what it’s all about.
What is Wayhome and how does it work?
Wayhome is a company that helps you to buy your own home without having to access a traditional mortgage.
When you purchase a home using the Wayhome scheme, you aren’t taking out a loan and you aren’t increasing the amount of debt you have.
Instead, you’ll buy a property with the help of investors selected by Wayhome. You’ll need to pay at least 5% of the property’s value up front and the selected investors will buy the rest of your new home on your behalf.
You’ll pay ‘rent’ to the investors each month on the portion of the home you don’t yet formally own. Over time you can make additional payments until you own the property in full.
Does this sound confusing? Read on and it’ll hopefully make more sense…
Do I need a deposit to use the Wayhome scheme?
Yes. You need a deposit of at least 5% or more to use the scheme. Your deposit must be at least £12,500. This means the home you’re buying must cost at least £250,000.
To learn more about buying your first home, take a look at Can’t Swing a Cat’s first time buyer blog section.
How much money do I need to earn to use Wayhome?
You need to have a household income of at least £30,000. If you’re buying a home with your partner or a friend, this can be split between you. If you’re buying alone, your income will still need to be £30,000 or above.
Once I’ve paid my deposit, where does the rest of the money come from?
The money comes from Wayhome’s investment partners.
The Wayhome website says: “Our investment partners are long-standing institutions that like long-term, low-volatile investments. Your rent payments help them pay their liabilities like pensioners’ retirements.”
“Residential homes fit their investment criteria but so far our investment partners haven’t been able to invest in them. They couldn’t buy enough of them to make it worth their while and they didn’t want to be a landlord for lots of homes.We give them access to investments in residential homes on a big enough scale and we take care of finding people like you to call them home.”
How much rent will I need to pay ?
The amount of rent you pay will depend on the value of your home and the percentage you’ve put down as a deposit. This is because your rent is calculated by looking at the average rent of similar homes in the area.
For example, if you buy 10% of a home that normally rents for £1,000 a month, on day 1 you only pay £900 (90% of £1,000).
If you’re tired of living in rented properties where you’re unable to decorate or so much as put up a painting in your kitchen, Wayhome could offer a solution. You’ll be able to treat the property as if it’s your own from the outset. You can decorate, hang pictures, and make huge garden alterations if you wish.
How do I buy the home in full?
To own the property in full, you need to put more money towards it. This is referred to as ‘topping up’.
There are two ways to top up:
- Increase your rent payments every month to top-up. If your rent is £900 and you set up a direct debit for £950, the extra money buys more of your home
- Make one-off payments. This could be ideal if you win some money or you get a bonus at work
What’s the catch?
Some first time buyers may be disappointed to learn that Wayhome will only let you buy 5% of your property’s value each year. It explains why here:
“We want to stop people, who can already buy a home, taking advantage of our benefits to later buy the entire home if house prices drop. In fairness, we need to protect our investment partners’ money while helping people – who actually need the help – to become homeowners. Also, 5% doesn’t sound like much, but it’s still a lot of money. Imagine you start with 5% of a home worth £500,000. Your 5% is worth £25,000 leaving £475,000 left to buy. If your home stays at that value, 5% more would cost you £25,000. That works out at just over £2,000 per month, on top of your rent.”
What’s the difference between Wayhome and a traditional mortgage?
When you get a mortgage, you’re borrowing money from a bank, building society or another type of lender and securing this loan against your home.
When you use Wayhome, however, you’re not borrowing money and therefore you’re not taking on any debt.
Instead, Wayhome’s investment partners buy your home with you and together you pay for it in full.
What’s the difference between Wayhome and shared ownership schemes?
The Wayhome team are eager to distance themselves from Shared Ownership schemes. I’ve taken the table below from the website.
What is Wayhome’s criteria?
When you apply for Wayhome’s help, you’ll be assessed on the following criteria:
- How much money you have for a deposit (minimum £12,500)
- Your household income (minimum £30,000)
- How your household income is split if you’re buying with a partner
- How many kids you have, if any
- Your credit score
- Your track record of paying rent
- Whether you’ve ever been declared bankrupt
- References from landlords and/or employers
Can I use Wayhome to buy a new build?
Unfortunately, you can’t use Wayhome to buy a new build. This is because Wayhome considers new build properties to be ‘risky’ investments. The Wayhome website lists the following reasons as to why new builds aren’t as secure for their investors:
new builds haven’t been sold before so we can’t work out a fair price to buy them
new builds haven’t proven they are built well and can last
new builds don’t have interesting characteristics – like fireplaces or bay windows – and so don’t have as much potential to grow in value”
As someone who lives in a new build, all I can say to that is ‘rude!’
Can I use Wayhome if I have a poor credit rating?
If you have a poor credit rating, it’s unlikely you’ll be able to use Wayhome. Your credit rating will be assessed and if it’s low or you’ve had difficulties paying off debts in the past, you may be rejected.
Should I use Wayhome if I’ve been offered a mortgage?
If you’re in a position to get a mortgage, it’s probably best that you do that.
Mortgages have been around for centuries and to an extent, you know what you’re getting. Wayhome, on the other hand, is a completely new concept and there’s a lot of uncertainty surrounding it.
I’m not suggesting mortgages are completely risk-free, but there’s so much regulation surrounding them that they’re likely to be much more stable than Wayhome.
What’s the point of Wayhome?
When Wayhome was called’ Unmortgage’ it was marketed as an alternative to mortgages. However, since its rebrand the company seems to be framing itself very differently.
Its tag-line is now ‘gradual homeownership’ and on the website it says:
“Unmortgage only referred to the financial part of how we help, which doesn’t even involve a mortgage. And, our old name never reflected the other side of what we do. After arranging the finances we also take on all the stressful, time consuming things like chasing solicitors and analysing property surveys. Then, after you move in we’re still there to help. It’s your home but if the boiler needs replacing, let us know.
So, we went on the hunt for a new name. One that’s more us—a better description of how we help.
And, we found it. Our new name is Wayhome.
We’ve spoken to hundreds and hundreds of aspiring homeowners, stuck renting. A lot of us here are in the same situation and it really sucks. We all want a home. Somewhere to call our own. A place where our kids can paint their bedrooms purple. A place where we can put up our favourite pictures or plant a tree in the garden.
It’s our job to get you there. “
Before I continue, just a friendly reminder that I’m not a financial advisor and have no formal finance qualifications. The only way to truly find out if Wayhome is right for you is to speak to a finance expert.
Personally, I’m a little skeptical of Wayhome. When we look at all the reasons why people struggle to buy their own homes, this scheme fails to address most of them. For example:
- If you’re struggling to save a 5% deposit, Wayhome is unsuitable for you.
- If you have a poor credit rating, Wayhome is unsuitable for you.
- If you earn less than £30,000 a year and you don’t have a partner to buy with, Wayhome is unsuitable for you.