Mortgage lender Ahauz has launched today and will will lend first-time buyers an equity loan up to 25% of the property value.
This is taken in addition to their primary mortgage, allowing them to access a lower LTV from their chosen bank or building society.
Ahauz is a privately funded solution but says it has similarities to the Government’s Help to Buy (HTB) equity loan scheme. While HTB is only available on new build properties, Ahauz is available on existing homes, which represent 90% of the market.
Typically, first-time buyers are able to borrow up to 4.5 times their household income from a mortgage lender. As Ahauz’s equity loan is taken alongside the primary mortgage, it boosts their borrowing power from 4.5 to 6 times income enabling.
Ahauz says a couple earning £25,000 each could increase their budget by 25% from £240,000 to £300,000 using an Ahauz equity loan.
The lender charges an interest rate starting at 6.99% on its equity loans. It only applies on the smaller Ahauz loan, bringing the blended rate of the primary mortgage and Ahauz’s loan down to less than 2.9%.
Karthik Srivats, co-founder of Ahauz, said: “A recent market study concluded that today’s homebuyers could end up £326,000 wealthier over a 30-year period than people who rent, without even considering potential house price growth. Ahauz enables people to move quickly and easily from renting to owning with just a 5% deposit.
“Historically, first-time buyers have struggled to borrow what they need, because interest rates can rise prohibitively once you pass the 75%-80% LTV point. We are effectively boosting their deposit to help them get on the property ladder.
“For some this will mean buying more quickly and moving away from renting, while others will be able to increase their budget and buy the home they really want. This will be particularly valuable in those areas of the country with high property values relative to people’s earnings.
“Ahauz’s product is similar to the UK government’s Help to Buy equity loan scheme, which has been a trailblazer for the equity loan product, providing 270,104 first-time buyers with a leg up onto the property ladder so far. What we’re doing is increasing consumer choice by making a similar product available to those buying existing properties, which represent 90% of the market.
“Ahauz is a privately funded solution built to be a win-win situation for everyone. First-time buyers get to pay less each month, or buy a home of larger value, while funders get to back the next generation of creditworthy first-time buyers while gaining access to the resilient UK residential property market, which even during the pandemic has been very stable.”