The HomeBuy Direct Scheme Explained
Many first time buyers struggle in today's market to get their foot on the first rung of the property ladder; finding mortgages tough to obtain and the size of the deposit required way out of reach. The HomeBuy Direct scheme has been initiated to help first time buyers, who can't afford to buy on their own, by supplying up to 30 per cent of the cost of their new home.
The scheme is partially funded by the Government, with the remainder financed by the Housebuilder. You as the prospective home owner will then have to find the remaining 70 per cent (minimum) of the value of the house. This is usually jointly financed through a mortgage and deposit.
The 30 per cent loan is called an 'equity loan' because the amount you owe will change with the value of your home. This means that should the value of the house increase from the time you buy to the time you sell, both the Government and the Housebuilder will share in the increase, relative to the amount they contributed. If the value of the property decreases, the Government and Homebuilder only share the leftover proceeds once the mortgage (your share) has been paid.
Throughout the first five years in the property the homeowner does not pay any interest on the loan. This kicks in in year six, at the rate of 1.75 per cent of the total equity value, and rises each year by the Retail Price Index plus 1 per cent. This idea of this increasing fee system is to encourage homeowners to pay off the loan more quickly, thus encouraging them to own 100 per cent of the home themselves.
The HomeBuy Direct scheme is only available on selected new homes. To qualify, the prospective buyer must meet several criteria, including the household's annual income being below the threshold of 60,000 per annum. The household is classified as anyone wishing to own a stake and contribute financially to the cost of the house.
The scheme is open to a range of people that cannot afford to buy in their current circumstances. These include key workers in the public sector, first time buyers, people renting council or housing association housing or those who have previously owned a home but now cannot afford to do so.
The HomeBuy Direct scheme comes to a close in July, therefore people wishing to take advantage of the offer must do so in the very near future. You must also complete by the 30th September at the very latest. Homes that have not completed by this time will not be able to make use of the scheme, even if the process has already begun.
Arthur Sperks is obsessed with homes, architecture, design and the property market; including schemes like HomeBuy Direct that help individuals get on the property ladder. He writes frequently on these subjects and enjoys guest posting on numerous blogs throughout the Internet.