Guide to Government HomeBuy Schemes

1. Introduction to HomeBuy schemes available

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As a result of significant house price rises over recent years, many individuals have found that they don't earn enough money to purchase their own home. The government has recognised this and has introduced an initiative called 'HomeBuy' (known as 'FIRST STEPS' in London).

This Government's HomeBuy scheme allows potential purchasers to buy a stake in their desired property using a combination of their own funds (the deposit), and a mortgage. The remaining stake in the property is funded in different ways depending on the chosen product.

There are two broad product types under the HomeBuy initiative (known as 'FIRST STEPS' in London):

• 'FirstBuy' (Equity Loan)
• 'Shared Ownership'

Under the FirstBuy scheme an equity loan is provided by the Government and the house builder. Whereas under the 'shared ownership' scheme individuals are able to buy part of a property and pay rent on the outstanding share.

2. How FirstBuy works

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The FirstBuy scheme involves an equity loan arrangement whereby an interest free loan is provided by the Government and the house builder. The value of the loan can be up to 20% of the property purchase price. There are no fees applicable on the loan for 5 years, after this period an annual fee based on the loan’s value will be charged. The fee will increase annually in line with inflation. .

The value of the loan will increase or decrease in line with the value of your property.

Example: If you purchase a property for £100,000 using a 20% equity loan; if your property rises to £110,000 the equity loan amount will be £22,000; if your property falls to £90,000 the equity loan amount will be £18,000.

The remaining percentage of the purchase price will need to be funded using a mixture of savings (the deposit) and a mortgage. As a result, FirstBuy makes it possible to move with just a 5% deposit.

Under the FirstBuy scheme you can sell your home at any time however you will be required to repay the equity loan in full.

3. How Shared ownership works

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Under the 'shared ownership' scheme individuals are able to buy part of a property and pay rent on the outstanding share.

At the time of purchase the maximum share that can be purchased is 75%, the minimum is 25%. The share you purchase will need to be funded by yourself using a mixture of your savings (the deposit) and a mortgage.

The housing association will purchase the remaining share and charge you rent. If you wish, you will be able to purchase further shares in your home at a later date.

4. Scheme eligibility

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The Government's HomeBuy scheme is open to a variety of households that meet certain pre-determined criteria and fall into one of the categories below.

• Social Tenants
• Serving MOD personnel
• First Time Buyers who fit the criteria below
• Individuals who have previously owned property but can’t afford to buy one now

Criteria:

To be eligible for all government funded homes available through HomeBuy:

• Your household income must be under £60,000 per year
• You must be able to demonstrate that you do not have an adverse credit history and can afford to sustain the costs involved in buying or renting a home.
• You must show that you are not in mortgage or rent arrears, or in breach of your current tenancy agreement at the time of application.
• You cannot afford to buy a property that meets your current housing needs without assistance through HomeBuy

(source: www.homebuy.co.uk/eligibility)

Homeowners: If you own a home, including one bought through shared ownership or a home ownership product designed for key workers, you are not eligible for assistance through government funded products. If you own a property and wish to buy or rent a home through HomeBuy you must demonstrate that you are in housing need, have local authority support or have sold your property before you apply.

5. How to apply

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If you are interested in applying for any of the Government run HomeBuy schemes, arrange a no-obligation meeting with a mortgage consultant. The consultant will be able to discuss the various options available to you and put you in touch with a HomeBuy agent.

The HomeBuy agent will assess your eligibility, progress your HomeBuy application and help identify appropriate schemes in your area.

Your mortgage consultant will also be able to recommend a suitable mortgage product from the options available and progress all of the appropriate mortgage paperwork.