Changes to Open Market Home Buy scheme - 23 July 2007

Q: What are the changes? 

The existing Open Market HomeBuy product with lenders will remain available, and will be unchanged. This will continue to consist of a conventional mortgage for 75% of purchase price alongside two 12.5% equity loans – one from the Government’s HomeBuy Agent and one from one of the four participating lenders. 

A second product will now also be available.    This will offer a HomeBuy Agent equity loan of up to a maximum of 17.5% of the purchase price, which can be used in conjunction with a conventional mortgage from any qualified lender regulated by the Financial Services Authority. 

Q: What is a qualified lender? 

A qualified lender is authorised and regulated by the Financial Services Authority and includes most banks and building societies.   If there is any doubt whether a lender falls within this definition the HomeBuy Agent or CTAB Mortgage Desk will be able to advise.      

Although this is how a qualified lender is correctly described not all lenders will be offering mortgages for the new 17.5% product. 
 

Q: What are the features of the 17.5% product? 

• Charges/Interest - There is no ongoing charge or interest on the loan, but the purchaser will share any uplift in property value with the Government when they pay the loan back. This is the same as the HomeBuy Agent’s equity loan within the existing product.

 

• Deposits - The loan can be used in conjunction with any other deposit the purchaser may have.   There are no restrictions on the use of purchaser deposits.

 

• Paying back the loan - The loan must be repaid when the property is sold, but can also be paid back earlier, as and when the owner can afford to do so. The amount that is repaid is calculated as 17.5% of the property’s market value at the time of repayment (or less if they take out a smaller equity loan).   If the purchaser has been helped because of their key worker status the loan may be clawed back if they leave qualifying employment.

 

• Eligibility – Eligibility is exactly as for New Build HomeBuy and for the Open Market HomeBuy product with lenders – i.e. social tenants, key workers and other priority groups as indicated by Regional Housing Boards.  HomeBuy Agents will advise applicants on whether they are eligible.

 

• Application Process – applicants should apply to HomeBuy Agents, exactly as for the existing product.   The HomeBuy Agent will advise if applicants are eligible and will recommend an IFA : CTAB are currently working with a number of Homebuy Agents.   The next stage will be for us to provide you with Key Facts Mortgage Illustrations then, at the appropriate time, obtain the lender’s Agreement in Principle for your mortgage – most AIPs can be requested on-line which speeds up the process.  

 

• Maximum loan – The maximum loan that can be given is £50k. If more funding is needed, exceptional cases can be referred to the Housing Corporation Regional Investment Team.   Purchasers will be offered what they need up to a maximum of 17.5% of purchase price, and will not automatically be offered the full amount possible.

 

• Portability – key workers can port their loan and any uplift, provided they remain a key worker, if they need to move to an alternative property - for example their job has relocated or their accommodation needs have changed, however, they will not receive additional funding relating to the value of their new home and HomeBuy Agents can’t top up funding from their own resources. 

 

• Remortgaging - Purchasers are free to re-mortgage with a different qualified lender, but will need the HomeBuy Agent's consent if the equity loan is still in place.

 

• Selling – Owners will need to inform HomeBuy Agents when they wish to sell. The HomeBuy Agents will then arrange the valuation.

 

Q: Can purchasers pay off the loan in stages? 

      The loan needs to be paid off in one go – 17.5% of the current property value.  

Q: Why are the Government making changes? Has the old product failed? 

The Open Market HomeBuy product with lenders has not failed.   Over 800      purchasers have already bought through this scheme however, it is not sufficiently flexible for everyone who needs help purchasing on the open market.   There are some elements of the scheme that have meant that some who may have taken it up, have not - for example, the inability to use deposits. 

The Government hopes that by offering 2 options under Open Market HomeBuy, they will be able to cater for different needs and provide greater choice.  

Q: If I have already bought under the previous product, can I switch? 

If you have bought under the existing Open Market HomeBuy scheme (i.e. 25% equity loan provided by the Government and a participating lender), you won’t be able to switch to the new scheme.  

Q: Which lenders can I go to? 

Any lender regulated by the Financial Services Authority that will accept the Governments’ equity loan.    We can provide Key Facts Mortgage Illustrations of available products.  

Q: I am half way through applying for the previous product, can I switch? 

Yes – if you have not exchanged on your property through the current 25% equity loan scheme, you will be able to apply for the new 17.5% product.   You may, however, lose any booking or valuation fees you have paid for your Open Market HomeBuy mortgage under the scheme with lenders, however, there is no reason why a current Homebuyer’s Report cannot continue to be used but another valuation for mortgage purposes fee will be payable. 

Q: Have any other rules changed? 

There are no other changes to the HomeBuy Agents’ equity loan.  

The specific product features of each of the lenders participating in the current scheme will not apply.   The purchaser will be subject to the rules applied by the lender they choose to take out a mortgage with, as they would be if they were purchasing a property on the open market without assistance.