The Open Market HomeBuy Scheme for Cash-Strapped First-Time Buyers

NOTE This scheme was a Labour Government policy which has been replaced by the Conservative Government’s Help to Buy scheme. We are leaving the information below for the historical record

 

This is one of several Government-backed schemes to help workers on a low income buy a home of their own.

Basically, it provides access to additional low-cost funding, to add to a mortgage, so even if you don’t have a deposit you can afford a property.

Other initiatives, known as the Social HomeBuy and New Build HomeBuy schemes, allow you to buy part of a property in association with a landlord, while paying an affordable rent on the rest.

There are two versions:

With the original scheme, known as expanded Open Market HomeBuy, you buy in partnership with your lender and the Government.

With the newer Government-only Open Market HomeBuy scheme, it alone provides the extra finance.

 

The Expanded Open Market Scheme

• How does it work?

You fund around 75 per cent of your purchase with an ordinary mortgage provided by one of the (at the time of writing) handful of participating mortgage lenders plus whatever savings you have.

You will be charged interest on this loan in the normal way and make monthly repayments to the lender.

You top this up to 100 per cent of the purchase price with two additional loans of around 12.5 per cent each, one provided by the same lender, the other from the Government.

The Government loan is interest-free and fee-free and is administered by a HomeBuy agent usually a housing association.

The mortgage lender won’t charge any fees or interest on its additional loan for the first five years.

After that, it can charge interest at an increasing rate.

 

The Government-only Open Market scheme

• How does it work?

With this newer scheme, you fund at least 82.5 per cent of your purchase price with a conventional mortgage from a lender of your choice plus any savings you have.

You make this up to 100 per cent with an interest-free and fee-free Government loan worth up to 17.5 per cent of the value of your home.

The maximum for this loan is £50,000 and, as before, it will be administered by a HomeBuy agent.

 

How Do I Qualify for these schemes?

Those eligible to apply include existing council and housing association tenants, key workers, such as nurses, teachers and police officers, anyone on council housing waiting lists and some other priority first-time buyers.

 

What if I Want to Sell?

When you sell up, or decide to remortgage to a traditional home loan deal, you repay the outstanding mortgage in the usual way.

The amount you will have to pay to clear the additional loans from the mortgage lender and/or the HomeBuy agent will depend on the rise in the value of your property.

If, say, you sell your home for 10 per cent more than you paid, you will need to repay your original debt plus 10 per cent.

If you make 20 per cent, you will need to repay an extra 20 per cent.

 

What Else do I Need to Know?

You can remortgage to a different lender and remain part of the scheme provided you get your HomeBuy agent’s permission.

If you stick with the expanded scheme until the end of your mortgage term, you will have to repay your lender’s additional loan when you make the final payment on your mortgage.

You won’t have to pay the Government part until you sell the property.

If you qualify for one of these schemes as a key worker, but then change jobs and lose this status, you must repay the HomeBuy agent’s loan and possibly the lender’s additional loan within two years.

To find out about other Government HomeBuy schemes, go to