HomeBuy Direct: Buyers Guide

HomeBuy Direct: Where Can I Buy?

HomeBuy Direct – Equity Loan Scheme

Launched in January 2009, HomeBuy Direct is a £300m backed ‘shared equity scheme’ designed to help up to 10,000 First-Time Buyers into affordable home ownership.
The scheme is offered on specific new build properties offered by a number of selected developers.

Eligible buyers may be able to access an equity loan of up to 30 per cent of the purchase price of any specified properties within selected developments. This loan is co-funded by Government and the developer.

HomeBuy Direct responds to the current market conditions by:

• making more affordable homes available to First-Time Buyers who are currently priced out of the market, due to the higher cost of obtaining a mortgage or the need to provide a larger deposit
• providing a targeted boost to the housing market by stimulating more transactions,
• helping to maintain the capacity of the house building industry to respond when market conditions improve. This will, in turn, help us to achieve our long-term housing supply targets.

How it works?

General eligibility for HomeBuy Direct is the same as for the other HomeBuy products (i.e. households earning less than £60,000 who cannot afford to buy a suitable property on the open market without assistance in the area where they live or work).

The purchaser will receive an equity loan of up to 30 per cent of the purchase price of the chosen property. The equity loan will be co-funded on equal terms by Government and by the developer supplying the property. The purchaser must contribute the remaining equity (a minimum of 70 per cent), through their mortgage (which could be obtained from any lender regulated by the Financial Services Authority) and any deposit.

There will be no fee charge for the equity loan for the first five years but a fee of 1.75% will be charged from year six onwards. This charge will rise by an amount equivalent to the Retail Price Index plus an additional 1% on an annual basis.

Purchasers can redeem the equity loan in instalments, purchasing up to 100 per cent equity after their initial purchase by buying additional equity at the market rate. Buyers will be able to sell their HomeBuy Direct home on the open market. When they do so, they will repay the equity loan by way of a share of the sale proceeds. This repayment will be shared equally between Government and the developer.

If the value of the property has increased by the point of sale, the buyer, the developer and Government will all share in this increase. If the value of the property has gone down, Government and the developer will only share the sale proceeds that are left over once the.