Homebuy Information Booklet
Introduction The Homebuy scheme enables MHA to provide an equity loan to someone seeking to buy affordable housing in Monmouthshire. Alternatively it can be used by a MHA tenant to help them purchase the home they live in. Both are subject to the qualifying criteria explained below. Homebuy is intended to help someone who can access and afford a mortgage but is unable to purchase a property to meet their housing need on the open market. It is not intended to help those who can afford to buy a property suited to their housing need, without financial assistance from the government. Nor anyone who is adequately housed but wishes to move to a more expensive location. Any housing stock that originally belonged to Monmouthshire Council before MHA was formed is not eligible for Homebuy. New affordable homes built by MHA with Government funding or delivered as part of Monmouthshire County Council s planning Agreements with private developers are eligible for Homebuy under the Council s Neutral Tenure Policy. Homebuy is separate to either the Preserved Right to Buy or the Right to Acquire (these are only available to social housing tenants). Someone offered a discount under one of these schemes would not be eligible for Homebuy as well. If you are an MHA tenant and would like information on the Right to Buy or the Right to Acquire schemes, please contact our New Homes Team on 01495 745763. Homebuy is shared equity, which is not the same as shared ownership. Under shared ownership, buyers purchase a percentage of the property and pay rent for the percentage they don t own; under shared equity no rent is paid. MHA does not operate shared ownership housing, only Homebuy.
How does Homebuy work? The scheme works by MHA funding a minimum of 30% or 50% of a property s purchase price. So you would need to fund between 70% to 50% of the purchase price yourself. MHA will advise you on the equity loan percentage that will be available for the property that you are seeking to purchase. After purchasing your home the shared equity loan can be moved up or down by 10% at any time, but by no less than 5,000. To increase the shared equity loan after purchase, MHA would have to give approval (at our discretion). We would not allow the shared equity loan to increase to more than 50%. The entire equity loan can be repaid at any time as well, which means there would be no shared equity left in the property. Any costs related to altering the equity loan amount following purchase would be borne entirely by you. The loan must be repaid in full when the property is sold. It cannot be paid in instalments. The amount paid is the equivalent percentage value of the home when it is sold. There is no annual percentage rate to be paid on the loan. Example: Purchase price of property: 200,000 (open market value) Equity loan provided by MHA: 60,000 (30%) Your mortgage on property: 140,000 Open market value upon sale of property: 260,000 You pay 30% of 260,000 upon sale: 78,000
What are the advantages of Homebuy? The equity loan can make purchasing a property significantly more affordable. You do not have to pay any rent for the shared equity loan. If circumstances change and you need to sell, you may be able to continue living in the property if you want to (e.g. children aren t disrupted). MHA may be able to purchase the property. If this happens, you would be given a tenancy agreement and have to pay rent to MHA to continue living at the property. What are the disadvantages of Homebuy? Any improvements that you make to the property to increase its value, will also be reflected in the equity loan upon resale. You are solely responsible for the upkeep of the property including all repairs and maintenance. There are restrictions on the re-sale of the property and you must give MHA the first opportunity to find a purchaser, or possibly buy the property back. You must occupy the property as your only principal home, and you cannot sublet any part off the property without first obtaining written permission from MHA.
Am I eligible? To qualify for the scheme, you must first be approved (in writing) by MHA. In considering your application, we will use Welsh Government rules currently in place at the time that you apply. As a guide, you will need to meet at least the following requirements: You must be able to show us that you cannot afford to buy a home suitable for your needs without help from Homebuy. MHA can turn you down if you could afford to buy a home without help. MHA will complete a financial assessment, based on Welsh Government guidance to assess your housing affordability. You will need to provide proof of your earnings and savings and proof that you have a mortgage in principle offer from a bank of building society. You must be able to obtain a mortgage (with a qualifying lender that will offer a Homebuy mortgage) to cover your contribution. You must also have sufficient savings to cover other costs associated with buying a home, such as solicitor s fees. You must not be receiving housing benefit or the housing element of universal credit, nor have received these 12 months prior to applying for Homebuy. You are not eligible for Homebuy if you already have a financial interest in another property (e.g. due to a previous relationship breakdown). If there is, you must sell this interest before applying to buy a home through Homebuy. N.B. the sale could affect your financial assessment, making you ineligible for Homebuy. The home you want to purchase must be suitable for your current housing needs. The home you buy must be your sole place of residence. If you are a social housing tenant you must not be in rent arrears or in breach of your tenancy agreement in any other way. If you are a MHA tenant and buying the property you are living in, then it will need to have been your principal home for at least the previous 12 months.
Additional criteria if you are not a MHA tenant In addition to the above, you would also need to: Provide a reservation fee of 350.00 to MHA, to secure the home you want to purchase (the 350 is taken off the purchase price when you buy the property, so you don t lose it). Local Connection Can I buy with someone else or on my own? Joint applicants can purchase together provided your joint income and savings do not enable you to buy a home outright. A joint application will not qualify unless all parties are to jointly own the home. A Deed of Trust providing rights of occupation for a qualifying applicant is unacceptable as an alternative to becoming a joint legal owner. What if I hold a joint tenancy agreement with MHA but I want to purchase on my own? MHA will agree to this, providing that both parties sign to agree that only one tenant is purchasing on the Homebuy application form. MHA will, however, still take joint finances and circumstances into account, including any interest in another property, when deciding eligibility for Homebuy. N.B. A joint tenant who is not purchasing on the Homebuy application will have their right to occupancy change; the joint tenancy will end at the point of purchase and your legal rights will be affected. If you are not clear on what this means you should take independent advice.
What are my responsibilities if I buy? You will be responsible for all legal and other costs e.g. stamp duty; legal and land registry fees; survey fees. You will be responsible for the cost of getting a Homebuy mortgage and mortgage repayments. Also potentially mortgage repayment protection insurance. You will need to pay council tax. You will need to pay utility bills. You may need to pay service connection fees. You may need to pay removal costs. You will need to pay for all repairs and maintenance. You must notify MHA and obtain our written approval to make any alterations or improvements to the property. You will need to maintain your home to a good standard. You will be responsible for buildings and contents insurance. NB: If you purchase a flat, MHA will insure the building (not contents of a flat) and apportion the cost between owners of flats. Depending on the property you are purchasing, you may be responsible for service charges (such charges would be explained before you chose to purchase the property). MHA will provide an equity loan and pay for an independent valuation of the property you are buying. We will not assist you with any other costs associated with purchasing your home. Remember, your home is at risk of repossession if you do not keep up your payments on a mortgage or any other debt secured on it.
Should I seek independent advice? You should definitely take independent advice to clearly understand costs and obligations before committing to purchasing through Homebuy; associated costs are the same as buying on the open market. For the purposes of the Homebuy scheme a mortgage must be obtained from a lender offering Homebuy mortgages. Applicants should not incur any costs in obtaining a mortgage until the lender offering to provide the mortgage has confirmed they can do so. What if the person buying through Homebuy passes away? If someone who buys through Homebuy dies and a member of their family or their partner is left, they may take over ownership and continue to live in the home. If so, the costs of running the home and keeping up the mortgage repayments will normally transfer to whoever goes on living in the home. If not, the home will be sold to repay the outstanding equity loan, under the terms of the Homebuy agreement. You may wish to take out insurance that pays off the mortgage on death, although you do not have to.
What should I do if I want to sell or repay the equity loan? If you want to sell your home you will need to inform MHA as soon as possible. An independent valuation of your home will need to be arranged. You will be responsible for all valuation, legal and administrative costs payable in connection with any sale, or change to your equity loan. MHA has a maximum of 3 months to find another buyer on our Homebuy waiting list. Or alternatively we could choose to buy the property back. If after 3 months this did not happen, you would be able to sell the property on the open market. It would have to be sold under the same criteria as you bought under though (the shared equity loan would be recycled into the new purchase). The new buyer(s) would have to complete a Homebuy application and be checked for eligibility by MHA first, for the sale to allowed. You cannot sell the property on the open market if MHA informs you they have secured a buyer. The sale price will be dependent on an independent valuation. You may request a second independent valuation if you would like one, although you will be responsible for the cost of both. Upon sale you will repay the equity loan in full. If you sell on the open market you would be required to market the property through an estate agent and would be responsible for all fees and associated costs.
What happens if the property is left in a poor state of repair if you sell? When you buy your home you will sign to agree the condition of the home at the point of purchase. If you do not keep you property in the same repair, any valuation that is carried out on the property will be completed as if you kept the property in the state of repair you committed to, when you purchased the property. You will either be required to return the property back to its original condition or the price of making good will be deducted from your portion of the sale price upon sale of the property. NB: If you are a MHA tenant we will continue to carry out qualifying repairs on your property whilst your Homebuy application is being processed. How can I apply for Homebuy? Complete and return the application form in the pre-paid envelope. Supply identification. Provide bank statements and wages slips as applicable for the last three months (including for joint applicants). Provide a mortgage in principle certificate, which confirms the lender will provide a Homebuy mortgage. MHA will ask for further information or evidence to support your application as required.
Who can I contact for further information???? Summary of the MHA Homebuy Purchasing Process Check if you qualify Take independent advice on purchasing a home Complete and return the application form Supply evidence to support the qualifying checks MHA confirms in writing whether or not you qualify You confirm the property that you re buying Legal representative instructed and mortgage arranged Valuation and conveyancing carried out. Timeframe for purchase agreed Legal documentation signed, equity loan paid and home is purchased
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