NewBuild HomeBuy - Shared Ownership

HELPING YOU UNDERSTAND HOMEBUY
Homebuy is a Government initiative to provide different options to help people purchase their first home. This includes buying new properties on a shared ownership basis, help towards buying a property on the open market in the form of a loan and help for some Housing Association tenants to buy the home they rent. At Cole & Co we are keen to assist first time buyers acquiring their first home under these new schemes, as well as helping existing shared owners purchase subsequent shares in their home or selling their share pursuant to the terms of an existing shared ownership lease. We believe it is important that you instruct a solicitor who has expertise to conduct your shared ownership purchase to a high standard and is familiar with the requirements of mortgage lenders.

WHAT IS NEWBUILD HOMEBUY?
NewBuild HomeBuy is the new name for shared ownership. Through this scheme you buy a share of a property funded by a mortgage and pay rent to a Housing Association or other provider on the remaining share that you do not own. In most cases you can buy further shares in the property until you own your home outright. This is known as staircasing. There are some schemes, mainly in rural areas, where the percentage you can acquire is limited or the Housing Association may reserve the right to buy back the property (at full market value) so that homes remain available for people from the local area.

WHO CAN BUY THROUGH NEWBUILD HOMEBUY?
The scheme is intended for people who are first time buyers priced out of the housing market and who cannot afford to buy a home in the conventional way. They must also be in housing need. Priority is usually given to existing social housing tenants, those on Local Authority or Housing Association waiting lists or Keyworkers (those employed in certain occupations that provide a vital service to the community, such as teachers, nurses and firemen). Up to 4 people can purchase a property jointly but each person must meet the eligibility criteria. Rules for eligibility do vary and so it is important that you contact your local HomeBuy Agent.

The FIRST TIME BUYERS INITIATIVE scheme is a shared ownership scheme like NewBuild HomeBuy with around half of the homes available being for key public sector workers and the remaining homes available to groups identified as priorities by regional housing boards. After living in the property for 3 years, buyers will pay a charge based on the percentage of the equity they do not own of 1% per annum. The charge increases each year to a maximum of 3% after 5 years. When the homeowner sells the property, they will repay the Government’s contribution from the sale proceeds equal to the initial percentage contribution. Alternatively, homeowners can choose to reduce the sum by making a minimum repayment of 10% of the market value.

WHAT KIND OF PROPERTY CAN BE BOUGHT?
Either new properties being built by a Housing Association or existing shared ownership properties that are available for re-sale. WHAT SHARE CAN I ACQUIRE? Normally a share of between 25%-75% is acquired on the purchase of new shared ownership property but a Housing Association may be prepared to sell you a share less than this if you are unable to afford it. On the purchase of an existing shared ownership lease, the seller will sell whatever share that they own.

THE LEASE
Whether the property you are seeking to acquire is a house or a flat, you will be granted a long term lease (normally 99 or 125 years) which will set out your rights and responsibilities as a shared owner. This will set out the rent and other payments you will be responsible for and will include the necessary provisions for you to acquire a further share in your home at a later date. If the home you are acquiring is a house you will be responsible for all repairs and redecoration both internally and externally. If it is a flat, the Landlord will be responsible for the structural repairs of the building and the maintenance of the communal areas but you will have to pay a service charge levied by the Landlord. The Lease will also set out the procedure you will need to follow if you want to move which will include a period during which the Housing Association will have the right to market the property to others who qualify for NewBuild HomeBuy.

OTHER INITIATIVES TO HELP FIRST TIME BUYERS
In April 2008, two new equity loans became available under the Government’s Open Market HomeBuy Schemes. Both schemes give the homebuyer full ownership of their home and are available to social tenants, key public sector workers and qualifying first time buyers.
MYCHOICE HOMEBUY is a scheme whereby you can borrow between 15%-50% of the purchase price of a property as an equity loan. The loan can be used with a conventional mortgage from a range of qualified lenders. You pay a monthly fee of 1.75% on the equity share bought through the scheme. The fee will increase by reference to the Retail Prices Index plus 1% each year. After you have lived in the property for a year, you can pay off the loan either as a lump sum or in stages. Alternatively, you can pay off the loan when you sell your home. The amount you pay is based on the value of the property when you repay the loan.
OWNHOME is an equity loan whereby you can borrow between 20%-40% of the purchase price of a property. OwnHome needs to be used initially with a mortgage from the Co-operative Bank although the property can be remortgaged with a different lender once the period has come to an end under a fixed rate term. There is no interest charged on the loan for the first 5 years but there is a charge of 1.75% per year in years 6 to 10 which increases to 3.75% from year 11 onwards.

For more details - on a no obligation basis - please call or email:

Carolyn Eddy - Associate solicitor - 01603 617018 - ceddy@coleandcosolicitors.com