Habito gives first-time buyers loans to make cash offers
Habito has launched a new tool that lets first-time buyers make a cash offer on a property before their mortgage has been approved.
‘Habito Go’ is available to customers with at least a 15 per cent deposit and allows would-be homeowners to ‘upgrade’ their mortgage recommendation by giving them a loan to make a cash offer.
The digital broker assesses customers’ eligibility using information already given in the mortgage application process. Once the customer has been approved, Habito will provide them with the loan so they can make their cash offer.
They will have to pay a fee of 1.95 per cent of the total value of the property but will only be charged when they complete the purchase of the property.
The buyer will then continue to apply for their mortgage through Habito’s brokerage. If the mortgage doesn’t come through in time, the buyer would buy their home with the Habito Go loan and pay interest at a fixed rate of 0.5 per cent of the loan per month until the mortgage is completed. The mortgage is then used to pay off the Habito Go loan.
Once they are a homeowner, their mortgage purchase application will be cancelled, and they would need to apply for a remortgage, which will be offered at the same amount and on the same terms. If there is any difference in the cost of that new mortgage over the fixed term, Habito said it will pay the buyer the difference as cashback.
Shepherd Ncube, founder and chief executive of Springbok Properties, an estate agent, said the overall idea was “very innovative” as making first-time buyers appear “ready, willing and able” was “bound to be a winning solution”, but did raise concerns.
He said: “The caution, of course, is in the cost. Habito charges a 1.95 per cent arrangement fee. That’s pretty chunky on a typical £250,000 first purchase. Then there’s interest too at 0.5 per cent per month, far higher than a standard variable rate mortgage.
“In effect, you’re buying the advantage of speed and position but that could be the difference between edging out a competing buyer or not, so you should balance out the pros and cons before proceeding.”
Jeremy Leaf, north London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chairman, said: “The estate agent wants to try and establish the most serious buyer.
“If there is even the remotest chance of an offer falling through then it could have serious financial repercussions for the seller if they miss out on an offer from a prospective purchaser who is in a stronger position.”
He added: “Whether we would accept an offer from a prospective buyer who is awaiting for their mortgage to be approved depends on what they are waiting for.
“If it is fairly fundamental, they will be taken less seriously. If it is incidental, they have references and the agent has already seen evidence of their earnings, they will be taken much more seriously.”
What Habito says
Habito said it will fund the first phase off its own balance sheet and is in the final stages of agreeing terms with an investment partner.
Daniel Hegarty, founder and chief executive of Habito, said: “With Habito Go, we hope to arm buyers with the power of a cash offer for their dream home while giving sellers the reassurance of a guaranteed sale that is achievable in a fraction of the time normally required to complete a purchase.
“Typically, approved Habito Go customers can get their loan offer in as little as 24 hours, so they can make an attractive cash offer to estate agents and sellers, putting them in a stronger negotiating position on price.”