A Genie that could make your wishes come true

A new scheme offers first-time buyers hope, but is it worth opening the bottle, asks Chiara Cavaglieri

Aspiring homeowners must be sick of all the doom and gloom stories. We already have to worry about job security, pay freezes, the increasing cost of living and an ongoing double-dip recession, but anyone wanting to get a foot on the ladder faces even more bad news.

Many young people are priced out of today's mortgages, unable to provide the deposit that lenders require. However, tough times force industries to come up with innovative ideas to get things going again, and one company, Genie, is hoping to do exactly that with its new deposit-and-mortgage-free payment plan.

According to the latest stats from the Council of Mortgage Lenders first-time buyer activity is showing some signs of resilience with 19,200 loans handed to new homeowners, an increase of 9.1 per cent on May, yet few of these would have been able to do this alone.

Today, if you don't have a generous family member willing to part with their savings, mortgages are hard to come by with lenders favouring deposit-rich, ultra low-risk buyers and even if you can scramble together a small deposit, you'll pay way over the odds. With all this to contend with, it's no surprise some reports predict the average age of first-timers will increase into the late-30s, but the newly launched Genie home payment plan could offer a viable alternative to traditional home ownership.

"Whichever set of statistics you look at, the market is difficult for first time buyers. We feel there is need for innovation in the market. It needs fresh ideas. Things are going to be difficult for a long time and Genie is looking to give them an alternative," says Steve Hicks, the managing director of Genie.

The process starts with Genie buying new-build homes from housebuilders and developers, which it sells on to its customers under a 25-year payment plan. Under the plan, the occupier pays a monthly residency fee which issplit three ways: one part is an administration fee, another is interest (the Genie interest rate is currently 6 per cent) and the final part goes towards buying the property.

This fee increases annually but is fixed for the first five years and reviewed thereafter. So, if you wanted their four-bedroom townhouse in Carrville, County Durham, worth £165,000, the initial residency fee is £870 a month in year one, creeping up to £979 by year five, by which time you would own 18 per cent of the property. At this point the residency fee would be reviewed, but you would continue increasing your share of the property, reaching 20.5 per cent ownership by year 15, until you made the full 100 per cent at year 25.

"It is hard to directly compare the cost of this to a mortgage but one of the main differences is that you are the owner at outset with a mortgage and deposit-funded purchase, whereas you will gradually build ownership with this – any growth in the property is only partly the purchasers but that is always true of any shared ownership and could potentially be positive if prices fall," says David Hollingworth of mortgage brokers London & Country.

So far, 47 customers are already living in their Genie homes, all based in the North-east and with an average age of just 25, but there are plans for expansion in the North-west and London. Subject to a financial assessment of your ability to afford the plan, anyone with a pre-tax household income of at least £18,000 is eligible. A few niggly things could put you off initially – an 0845 phone number is never a great start and if you are made a formal offer there is also a non-refundable £600 plus VAT admin fee to pay. However, the big selling point is the level of flexibility Genie offers.

First, there are no early redemption or exit fees. If you suddenly find yourself with extra funds you can make lump sum payments (at a minimum of £5,000) which will be converted into a share based upon a professional valuation at the time. Alternatively, you can arrange to increase the residency fee so that you reach full ownership sooner. Equally if you fall on hard times, there is the option to come off the Genie payment plan for up to 12 months. During this time you get to keep the shares you have accrued, as these are locked in, and pay rent instead (which Genie say will be broadly based on market rent) which should also make it much easier to qualify for housing benefit.

"As soon as you get back on feet, you can return to the Genie payment plan and start accruing shares," says Mr Hicks.

Communication is the key, however, and if you miss a payment you will accrue default interest immediately and cannot acquire any further shares in the home. You also remain liable for the residency fee which could be taken from your share in the home. Ultimately, the message is that if you fail to meet the conditions of plan, Genie do have to the power to terminate it and you could lose your home.

As with any property purchases, house prices are always a sticky issue. Price fluctuations have no effect on your share of the property, but when you leave the plan or sell your home there is a risk that if prices fall you could get back less than what you've paid in. Also, if at the end of the arrangement you haven't managed to acquire 100 per cent you have three options; buy the remaining shares; sell your shares and use that money to purchase a different home; or see if you can extend your plan with Genie.

This isn't an equity release product so if you want to pullout of the deal you can end your arrangement at any point (again by either using your shares to refinance and buy the remaining shares, or selling your shares back to Genie, which has first refusal). Where problems could arise is if you and Genie cannot agree a price, but you do have the right to sell on the open market at a value which is the higher of the original price and the current market price.

Another potential concern is what happens if Genie falls into trouble but being authorised by the Financial Services Authority and back ed by Gentoo Group, a not-for-profit housing association with a healthy balance sheet and a good reputation, is reassuring.

Despite this, it pays to compare it to existing options such as the government-backed FirstBuy (shared equity) and NewBuy schemes, or buying with friends or family. There are also several products offered by mortgage lenders such as Lloyds' Lend a Hand scheme, the Parental Assisted Mortgage Scheme from Bath building society and Barclays' new Family Affordability Plan, which allow parents to act as guarantors, or use their savings/equity to offset your mortgage.

"Genie is a regulated firm and has been successfully launched for almost a year, so this should give people the confidence to at least look into it alongside these other available options," says Andy Frankish of independent broker Mortgage Advice Bureau. "As ever taking independent financial advice is vital; they will help you find the best option."

Case study: Geoff and Sarah Jubb, Sunderland

Geoff, 31 and Sarah, 32, were among the first people to take advantage of Genie, when they began looking for a new home to cater for their growing family. As parents of three children aged six and under, they were struggling for space but needed a helping hand to get their dream family home. Only five months after Genie was launched the couple decided it was the solution they were looking for.

"Genie was absolutely perfect for us," says Sarah. "The deal meant that we didn't have to have a huge deposit to make up front and having three little children our outgoings meant that we couldn't save this much money in the shorter term".

Sarah, a planning consultant and her husband Geoff, a gas engineer, moved into their new home at the Beckwith Green development in April. The property is worth £180,000 and they currently pay Genie £954 per month, but Sarah says they would have had to pay a deposit of around £20,000 if they had gone down the traditional mortgage route.

"We knew that in the current economic climate we would really struggle to save such a vast deposit and the Genie scheme enabled us to bypass that huge hurdle".

Discover more property articles at Homes and Property
Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Property search
Property search
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

E-Commerce Developer

£45000 - £60000 per annum + competitive: Progressive Recruitment: Exciting opp...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice