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22 May, 2018/ by Homeward Legal /First Time Buyer

First-time buyers could soon have another Help to Buy option, thanks to an innovative new start-up. Proportunity, backed by investment from the likes of estate agents Savills, is to launch its own equity loan for first-time buyers in July.

The loan will work in the same way as the current Government-backed scheme. Buyers can borrow up to 15 percent of the value of a property, either newbuild or existing, to add to the 5 percent deposit they have already saved and allowing them to secure an 80 percent mortgage from a lender to buy their first home.

First-time buyers (FTBs) would pay interest on their equity loan at a rate of around 8 percent. As with the equity loans provided by the Government's scheme, the loan's value rises and falls depending on the value of the property. And just as with the Government scheme, buyers must pay the loan back within five years, usually through remortgaging to access the equity the property has realised in that time.

Proportunity has to get approval from the Financial Conduct Authority (FCA) to act as a financial services provider before it can launch its FTB equity loan.

Stefan Valentin Rusu, head of business development at Proportunity, said: "You can always get a 95 percent LTV mortgage from a first charge lender, but it's quite expensive. You are better paying rent. We wondered 'how can we help these people access their homes earlier?'

"We created a 'Proportunity loan' - it is an equity loan that works exactly the same as Help to Buy without the same restrictions."

Proportunity uses algorithms to predict areas where house price rises will occur, and once it has FCA approval, it intends to lend to buyers in those areas, focusing initially on London boroughs. The start-up began life using its algorithms to predict local house price rises, selling the technology to investors such as banks and hedge funds. Buyers can check out if the area they intend to buy in is covered by Proportunity by using their online affordability calculator.

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