No mortgage, no deposit, no estate agent – is this the future of house buying?

A developer-cum-finance house is marketing a deal which allows people to buy a home without a mortgage and without a deposit – and, so far at least, no estate agents.
This so-called home payment plan has in fact existed in the north east of England for three years already and has several dozens of owners who have used it. But the firm behind it, the Gentoo Group – which describes itself as a ‘profits for purpose’ company – now wants to extend its reach across the country.

It works like this: Gentoo buys, builds or redevelops properties which it then sells at open market value. But instead of selling it via an agent in the conventional way, it sells via an in-house financial product called the ‘Genie home purchase plan’ which operates along similar lines to sharia mortgages.

Instead of putting down a deposit and instead of securing a mortgage involving interest payments, the purchaser pays monthly instalments on a 30-year plan. At the end of the 30 years, the home is fully-owned by the purchaser; along the way, the owner’s monthly payments gives him or her part-ownership, depending on the number of payments made.

Gentoo says over the course of 30 years the total paid by the purchaser would be the equivalent of a mortgage with a 6.8 per cent APR.

The product is regulated by the Financial Conduct Authority, customers are credit checked in the usual way, and the purchaser has the typical financial responsibilities associated with a mortgage – that is, to pay monthly and to be obliged to pay the full amount of the value of the property if it is sold prior to the end of the 30 year term, even if at the time of sale its value is lower than its original purchase price.

Gentoo has first refusal to buy should a client sell before the end of 30 years, but if the firm declines the owner can instruct an estate agent to sell on the open market.

The firm wants to spread beyond the relatively low-cost housing market of the north east of England, where it has won considerable praise from housing market analysts and politicians for offering at least an alternative for people to get on the housing ladder.