According to polling conducted by the U.K. Ministry of Housing, 90% of Britons share the dream of owning their own home and do not want to rent indefinitely. Yet, a staggering 60% of both renters and adults living with their parents believe that they will never be able to buy their own home. Due to a combination of home prices, which have skyrocketed in the past years, tightening mortgage criteria and the end of Help-to-Buy, homeownership is less accessible than ever for young adults.
Faros Homes wants to change this.
What is Faros Homes?
Put simply, Faros Homes is a way for people with a steady income, but not enough money saved up, to live in their dream home while they save for their mortgage deposit.
Their leases allow their customers to choose a home of their choice, let Faros buy it for them, lease it from Faros Homes, save up and, eventually, buy it back from Faros Homes. At this point, the customer will be the sole homeowner.
“Young people in Britain are facing an unprecedented homeownership crisis, which will lead to long-term financial consequences for the wider economy, driven by high and rising house prices, combined with stagnating household income.”
Who Founded Faros Homes?
Faros Homes was founded by Vincent Huber and Nick Singh – long-time friends & colleagues who have years of experience working together, including jointly investing in real estate across England.
Nick’s and Vincent’s experience of both buy-to-let and flip investments, as well as their experience trying to become homeowners in London, have allowed them to appreciate the difficulty of becoming homeowners and the cumbersome buying process. The pair are supported by an experienced team of real estate specialists.
What is Faros Homes’ Mission?
Co-founders Nick and Vincent fundamentally believe that homeownership should be more easily accessible and are convinced that owning a home today is more difficult than it has to be. At Faros Homes, their mission is to empower homeownership by providing a bridge between reluctant renting and owning a home.
“Faros Homes aims to alleviate the structural barriers to homeownership through a rent-to-own solution that supports our customer in moving into their dream home today, while saving up to buy it in the future.”
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How Does It Work?
Faros offers a financially sustainable solution to the homeownership crisis, acting as an accelerated path to getting someone mortgage-ready, while allowing them to live in their dream home.
The steps involved in Faros Homes’ rent-to-buy program include:
The Customer Finds a Home
The first step in Faros Homes’ rent-to-buy program is for the customer to obtain a ‘Search Licence’, permitting them to search for properties – this involves a soft credit check. Properties must meet certain criteria, with some attributes being immediately unsuitable including, but not limited to: new build homes, basement apartments and properties next to rail lines or motorways.
Once a customer has found their perfect home that meets these criteria, they will submit it to Faros through their online platform for their approval.
Agreeing Lease Terms
Once the home is approved, the Faros team will make a proposal for the lease structure – this includes the Option Price (price that the customer can buy back the home from Faros) and monthly payments, which includes rent and the Equity Savings plan. This needs to be agreed before proceeding with the home purchase.
Each lease is bespoke to the savings needs of the customer and targets that the customer is mortgage-eligible by the end. Customers can choose the lease length between 3 and 8 years, while adjusting the monthly savings contribution according to their monthly income and outgoings.
Faros Homes Purchases the Property
Their bidding strategy and their status as all cash-buyers ensure that they secure an attractive price for the property, which the customer benefits from through a lower Option price.
As the legal buyer of the property, Faros Homes handles the conveyancing process, ensuring a quicker time to completion than a traditional mortgage purchase. All the customer has to do is prepare for their move-in!
The Customer Moves In
Once they have successfully completed the purchase, the customer can move-in and begin their journey towards homeownership. During their tenancy, Faros Homes’ in-house customer success team manages the properties and supports the tenants.
Monthly Payments
As per the agreed lease terms, the customer will pay rent and Equity Savings each month, enabling them to access the mortgage market by the end of the lease. Faros guarantees that the customer’s rent remains fixed for the first 3-years of their tenancy, to further support their goal in savings towards homeownership.
The Customer Buys Back the Property
If the customer chooses to exercise the lease option, they can then purchase the property at the predetermined Option Price, thereby becoming the sole owners of their home. At this stage, the customer will get back their initial deposit, all their Equity Savings contributions and a 15% cash-back bonus (calculated as a percentage of all the deposit and Equity Savings contributions), that the customer can use towards placing the deposit for their home.
When is Faros launching?
The Faros team is currently preparing to launch their rent-to-own offering to customers in England at the beginning of 2023. Until then, interested customers can visit their website and register their interest, to be informed as soon as Faros starts buying in their area. The Faros team is scheduling calls with interested customers to walk them through their offering.
With the government’s Help-to-Buy scheme’s new applications ending in October, Faros Homes is stepping in to try to fill the void and offer first-time buyers an alternative programme to get on the property ladder.
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