All you need to know about Even equity home loans
What is Even?
Even is an exciting new mortgage product designed to help First-time buyers to get a foot on the housing ladder. Even is a privately backed (rather than Government backed) organisation offering 'Help to Buy' style equity loans. The terms and conditions, fees and charges are very different to the Government's Help to Buy scheme and you will need to think carefully if Even's equity loan product is right for you. We hope you will find our Even equity loan guide helpful.
How does Even work?
Even will lend you up to two times your deposit, up to a maximum of £100,000, but no less than £7,500.
The money you receive from Even is called an equity loan. An equity loan is a loan that is tied to the value of your home.
If the value of your home increases you will pay Even back more money.
How much will I Have to pay Even Back when I sell my home?
The Even Equity loan is similar to a shared appreciation mortgage. If you contribute £25,000 to your deposit and Even also contributes £25,000 you and Even have put in 50% of the deposit each. Even will then have a 50% share of the increase in the value of your home
Even Equity Loan worked example
House price: £250,000
Deposit from the home buyer: £12,500
Even equity loan: £12,500
If you sell your home 12 years later when its value is £325,000, the gain in value is £75,000 which will be split 50:50 between you and Even. You will pay Even £37,500 of your profit and the original loan amount of £12,500.
In this example, the cost to you of the £12,500 is £50,000.
Is Even's share of my profits capped?
Yes. If you sell your home within 10 years Even's profit share is capped at two times the original loan. So if you borrow £12,500 and sell within 10 years, the most you will pay back is £37,500 (the loan of £12,500 plus up to £25,000 profit share)
If you sell after 10 years Even's profit share is capped at three times £37,500 in our example above plus the £12,500 loan making a total of £50,000.
How much do I pay Even back if the price of my house falls?
If for instance, you sell your home at a loss of £15,000, this loss will be shared in the same ratio as any gains.
If you put in 50% of the deposit and Even put in, the loss would be £7,500 each.
If when you sell your home your outstanding Even equity loan was £10,000, then £7,500 would be written off and you would still owe Even £2,500.
If the loss was £25,000, implying £12,500 each the whole £10,000 would be written off.
Is the loss always shared with Even?
No. If you pay back the loan before six years without selling the loss will not be shared and you will have to pay back the full amount of the outstanding Even equity loan.
How much does an Even equity loan cost?
At the time we wrote this article there was an application fee, a loan completion fee and you have to make monthly repayments of the Even equity loan.
The Application Fee is a one-off fee of £49 to cover compliance and identity checks on you and the property you are buying
The Equity Loan Completion fee is 5% of the equity loan value. If you borrow £10,000 the fee will be £500. This can be added to the loan, but this will increase Even's share of the deposit and therefore also increase their share of the profits.
Is there any interest to pay on an Even equity loan?
There is no interest charged on an Even equity loan.
The Even equity loan is interest-free, but you are asked to make monthly repayments of the loan.
If you have a 25-year mortgage in place you will have to repay the principal amount you borrowed back in equal instalments over those 25 years.
If you borrowed £30,000 you will have to make a monthly payment of Even of £100 per month.
Do my regular payments reduces Even's share of the profits?
No. The profit share is based on the original amount of your Even equity loan not on the balance outstanding when you sell your home.
Who is Even here to help?
Even is focused on helping first-time buyers to get a foot on the housing ladder
Am I eligible for Even?
The majority of first-time buyers will be eligible for Even.
What deposit do I need for Even?
You will need to have at least a 5% deposit to put towards the home you want to buy
What properties can I buy with Even?
The good news is that with Even you will be spoilt for choice. Unlike Help to Buy, Even is focused on the much larger second-hand market, and when we say much larger, we mean, much larger. Only around 15% of home purchases are new build, therefore 85% are secondhand or existing homes. There are around 28 million existing homes across the UK and we are only building around 300,000 new homes each year.
Your home must be located in England or Wales, cost more than £150,000 if in London and more than £100,000 in other parts of the country and not cost more than £1,000,000, which should cover most first-time buyer's budgets.
The property must be mortgageable, this means a bank, building society or other mortgage lenders must be willing to sell you a mortgage on the property
The property cannot be a new build home, a mobile home, a houseboat, a holiday let (including AirBnB) or used for a corporate purpose. In essence, it needs to be your primary residence where you and your household live
How does Even work with a traditional mortgage?
Even's equity loans are a type of mortgage, called a second charge mortgage. Your main mortgage is secured on the home it is helping you to buy. If you fail to pay the mortgage the lender has the 'first charge' over your home i.e. they can sell your home to recoup their money. As a second charge mortgage, Even's equity loan is also secured on your home, but only on the bit that is left after the first charge has been satisfied.
Can I use any mortgage provider with Even?
No. The lender you use has to be on the Even panel, what this means is that the main lender has a mortgage product that can work with Even. Not all lenders will want to lend to a first-time buyer who also wants to use a second charge mortgage to fund the purchase.
Even loans are interest-free is that a good thing?
On one hand yes, but on the other hand, Even is taking a share of the profits you make that are linked to their deposit contribution rather than the total value of the home. If you and Even contribute a 5% deposit each, although Even has only 'purchased' 5% if the home they will get to share in 50% of the profits, that is 10x their contribution. If house prices rise significantly an Even equity loan may turn out to be more expensive than other financing options.