In this brief guide, we are going to discuss the Hmebuy scheme.
What was Homebuy?
The Homebuy scheme was a scheme run by housing associations which provided you with a secured equity loan to buy a share in their housing association property.
The Homebuy scheme worked by allowing you to purchase an initial minimum share of 25% of your home and pay rent on the remaining shares of the property which were owned by the landlord. Your rent would have then been adjusted based on how much of the property you didn’t own.
You could then staircase all the way to100% and end up having to pay no rent. The additional shares could be purchased in 10% increments and their values were based on the current market value of the home.
If you had purchased 100% of the home you may still have had to pay any service charges which were due on the property
If you took out the Homebuy scheme then you will have to contact the equity loan provider when you want to:
Sell your home
Pay off the equity loan
Carry out structural home improvements
Sublet the property
Add or remove a name from the title deed
Extend the lease on the property
The Homebuy scheme above is the Homebuy scheme from England which ended, there is now a new Homebuy scheme in Wales.
The New Homebuy- Wales
The new Homebuy scheme in Wales provides you with an equity loan to help you purchase an existing property. It is suitable for people who could otherwise not afford to buy a property.
The Homebuy-Wales scheme is not available in all areas of Wales and in the areas where it is available it may be subject to some local eligibility criteria,
How does the Homebuy- Wales scheme work
The home buy scheme works like this: You produce 70% of the property price via a mortgage or your savings.
You get a 30% equity loan from the housing association which comes with no monthly repayments but you must repay the equity loan when you sell the property at the equivalent value of your home when you sell it.
You can repay the loan at any time and before you sell your home.
The price you will have to repay will be based on the value of your house at the time you repay the equity loan.
You may need a mortgage broker to help you get a mortgage if you are using a mortgage to finance the 70% share of the home you have to contribute. You will usually need at least a 5% mortgage deposit.
Eligibility of Hombuy- Wales
To be eligible for the Homebuy Wales scheme you will usually need:
To show the local authority or the housing association landlord that your current living circumstances are not adequate for you and you can’t afford them
To show that you can’t afford to buy a home without the help of the Homebuy scheme
to have not received housing benefits within the past 12 months and are not currently receiving it.
To meet local eligibility requirements where relevant
To be able to get a mortgage to cover your 70% share of the property and be able to afford the monthly mortgage repayments
How to apply for Homebuy- Wales
To apply for Homebuy-Wales you should request an application form from a participating social landlord, fill it in and return the form.
What is Social Homebuy?
“Social Homebuy is a grant-funded scheme which allows some tenants to buy their current home with the assistance of a discount of up to £16,000. You are offered the option to buy your home outright or buy in shares. You then pay rent on the rest of your home which you don’t own. The discounted market rent will be calculated on the total value of your home.”
Alternatives to home buy
There are now several schemes which will serve as suitable alternatives to Homebuy.
These are government schemes which can help you increase your mortgage deposit or reduce the cost of buying a house. 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 the new Homebuy-Wales scheme
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 buy scheme. If you have any questions or comments please let us know.