Home reach scheme (5 point review)
In this brief guide, we will define what the home reach scheme is and how it may be able to help you.
What is the Home reach scheme?
The home reach scheme is like a shared ownership scheme(in fact it is operated under the help to buy as part buy, part rent so it is essentially the shared ownership scheme rebranded and with a few tweaks) where you buy a hare of your home and then pay rent on the other part of the home which you do not own. The amount you have to purchase the share will help you decide if you want to buy a big share of a small home or a small share of a much bigger home.
You can purchase a share of the home with cash savings( unlike the shard ownership scheme) or with a mortgage.
If you are using a mortgage to finance your share of the home then you should remember that most mortgage lenders will require at least a 5% mortgage deposit.
Unlike with the shared ownership scheme, the home reach scheme allows you to initially purchase a maximum of 75%vof the shares in the home. The home is a leasehold home and you will have a 125-year lease. Your new landlord will be Heylo housing.
You will then pay rent at 2.75%v of the remaining shares in the property. You will pay this monthly via direct debit. With the home reach scheme, you will also be able to continue purchasing more shares until you fully own the home and no longer need to pay any more rent.
The number of shares you can initially buy will differ across the different housing developments. If you have found a home which is being marketed under the home reach scheme then you should contact the sales team to see what the maximum and minimum initial shares you can buy are.
Find home reach scheme properties
You can search for properties available under the home reach scheme by searching the home reach website.
You will find that home reach scheme properties are provided by a variety of builders including:
Kier living homes
& Miller homes
Eligibility for the home reach scheme
The eligibility requirements for the home reach scheme in England or Wales are as follows:
You are buying what will be your main residence
You must not have a household income of more than £80,000. (£90,000 in London boroughs)
You have registered with the local help to buy agent and have been accepted onto the scheme.
You have passed a financial assessment by the housing developer and can afford to buy the property and pay the monthly rent.
You are a first-time buyer or a previous homeowner who cannot afford to buy without the home reach scheme
What are the costs involved with the home reach scheme?
Some of the costs involved with the home reach scheme include:
The rent you have to pay on the part of the home you don’t purchase- Rent is charged at 2.75% of the property you don’t own and rises by RPI + 0.5%. Each year.
The cost of buying the initial share of the house
The reservation fee you have to pay on the property to reserve it. The sales team will inform you of when you have to pay this fee.
The admin fee payable to Heylo housing for managing your lease. Your conveyancer will let you know how much this will be.
Home insurance which is paid by your landlord(Heylo) and charged to you. You can ask your conveyancer about what this will be too.
Service fee: you will need to pay a service fee to the housebuilder. Ask the sales team about this fee.
Advance rent and admin fees for the remaining days of the month from when you move in and the following month due to the delay in setting up your direct debit which will start to be collected from the third month.
Steps to buy a home reach scheme home
- Register for the part buy part rent scheme with your local help to buy agent. You can register for a particular area or a particular development.
- Complete a financial assessment carried out by a financial advisor to determine if you can afford the rent today and the rent in 5 years based on your circumstances. This will determine the share of the property you can buy. You can also arrange for your own financial advisor to do this, Inquire with the development first.
- Choose the home you want to buy and pay a reservation fee. You will have 28 days to exchange contracts.
- If buying with a mortgage then get a mortgage offer– you can use a mortgage broker
- Appoint a conveyancer
- Pay your deposit, sign the contract and exchange contracts
- Complete on your purchase and move in.
What can you do with your home reach scheme property?
You can redecorate your home reach scheme property and you will be responsible for its maintenance and repair. You will need to get written permission from the landlord before you make any structural changes to the home reach scheme property.
Alternatives to the Home reach scheme
There are various government schemes which are alternatives to the home reach scheme. They include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire- same as above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
Getting a mortgage for your home reach scheme property
You may want to consider using an independent mortgage broker to get a mortgage.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we discussed the home reach scheme in great detail. If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.