DO IT YOURSELF HOMEBUY SCHEME Charitable Housing Association 54 Stryd y Dyffryn, Dinbych, LL16 3BW
HOMEBUY THIS BOOKLET TELLS YOU ABOUT: What is Homebuy? Page 3 How Homebuy works Page 4 Who is eligible for Homebuy? Page 5 What kind of property can I Page 7 buy through Homebuy? The requirements after you have Page 9 bought your home through Homebuy A summary of the scheme Page 11 Important information on repaying the Homebuy loan Page 13 2
WHAT IS HOMEBUY? This booklet is a guide to Do It Yourself (DIY) Homebuy scheme, a scheme that helps people to buy a property on the open market. Homebuy is a government-backed scheme that is supervised in Wales by the Welsh Assembly Government. DIY Homebuy is not intended for people who can afford to buy a property suited to their needs without assistance or for those who are adequately housed, but who wish to buy in a more expensive area. This guide does not state all the rules of the scheme and explains only its main features. For more information, please contact the office at the address shown on page 14. To see if you qualify to apply for Homebuy, please read pages 5 6. Before deciding to buy a property, you should take independent financial advice to get a clear idea of the costs and obligations of home ownership. 3
HOW HOMEBUY WORKS If you qualify for the scheme, you will need to be able to finance 70% of the purchase price of the property, either with a conventional mortgage, savings or a combination of both. Cymdeithas Tai Clwyd will provide you with a loan for the remaining 30%. In some circumstances, the loan can be increased to a maximum of 50%, for example in rural areas, but only where the applicant cannot afford to finance 70% of the purchase price. You may have to provide a 5% deposit of the price of your percentage share. The loan percentage will take into account your disposable income, mortgage and savings and purchase price of the property. If you are obtaining a mortgage to fund a part of your share, it must be obtained from a building society, a bank, a friendly society or an insurance company. Do not incur any costs in relation to obtaining a mortgage until the lender offering to provide the mortgage has confirmed that it is one of these types of lender. The mortgage must be a repayment mortgage (not interest only). The loan will be secured against the property, no rent or interest is paid on the loan. The loan must be repaid when you sell the property; the amount repaid will be the same percentage of the value of the property at the date of repayment as the equity loan was of the original purchase price. You may choose to repay the loan at any time during occupation, but must be repaid on sale of the property. You will be responsible for repairs and maintenance of the property, as well as keeping the property fully insured. You will be asked to provide a copy of your Buildings Insurance certificate on an annual basis to Cymdeithas Tai Clwyd. You must take out an insurance policy that repays the mortgage and Cymdeithas Tai Clwyd s loan in the event of death. If you decide that you wish to sell the property, you must give written notice to Cymdeithas Tai Clwyd of your desire to sell, as the Association has the right to nominate a prospective purchaser to purchase your home. The Association has 6 weeks to nominate and complete the purchase within a further 8 weeks. 4
WHO IS ELIGIBLE FOR HOMEBUY? You must currently be a tenant of a registered social landlord or a local authority or be eligible to be accepted on to a Low Cost Home Ownership register or waiting list for rented accommodation. You must have lived or worked in the area that you wish to purchase for a minimum period of 12 months, or comply with a local lettings policy s conditions. You must be able to qualify for, and access a mortgage. If funds are borrowed from another source, such as a family member, the loan from Cymdeithas Tai Clwyd will be secured as a first charge. You must be able to sustain all costs associated with home ownership, including any loans and other financial commitments you may have. Cymdeithas Tai Clwyd will carry out a financial assessment to determine whether you can afford to buy an equity share of 70% (or between 70% and 50% where applicable). You must not be in rent arrears or in breach of your tenancy agreement if you are a tenant of a registered social landlord or local authority. If you currently own your home or part-own a property, you can only be considered for Homebuy if the Association accepts that you are in housing need. For example: o You require a larger property due to an increase in family size. o You require a more suitable property due to a member of the household having a disability and your current home is not suitable for that person s needs. o Having to sell the matrimonial home in cases of relationship breakdown. o Elderly owner-occupier living in a property that is unsuitable for their current needs, but the proceeds of the sale is not enough to purchase a suitable dwelling outright. o Moving due to employment. You would have to sell your interest in the property at the same time as buying a home through Homebuy. 5
CAN YOU BUY WITH SOMEONE ELSE? You may jointly buy a home with someone else provided your joint income and savings do not enable you to buy a home outright. If the person you wish to buy with is not currently eligible to be accepted on to a housing waiting list, then the Association will consider the joint application on the basis that at least one person must meet the requirements of the scheme. Your joint income will be taken into account when deciding whether you can afford to buy a home without help from Homebuy. If the person joining you already owns a home, that property will have to be sold at the point of buying through Homebuy. Any profit from the sale will also be taken into account in considering the application. No more than four people can jointly buy through Homebuy. 6
WHAT KIND OF PROPERTY CAN I BUY THROUGH HOMEBUY? You may buy a new property or an older property, provided it is within the county you currently live or work: It is for sale on the open market with vacant possession and immediately habitable. It is acceptable for mortgage purposes. It is a residential property and has no commercial use. It must be suitable for the size of your family. The Association will have the right to restrict the size of the property you intend to purchase to no more than one bedroom larger than the household s need. We would not allow a single person to purchase a 3 bedroom property, only a 2 bedroom property. Exceptions may be made where the housing available in the area you choose to purchase is predominantly of one size or where prices are exceptionally high or you require a larger property due to a member of your household having a disability where an extra bedroom/room is essential. The local authority will be required to support the application to go over value limits. It must be within a value limit, determined by where you live and size of your family. The Association will inform you of the maximum purchase price of the property you may purchase in line with Acceptable Cost Guideline figures set by the Welsh Assembly Government. For example: a family with 2 or 3 children in Abergele will be able to purchase a property costing up to 136,100. However, the Association has the right to restrict the purchase price limit based on the assessment of disposable income and savings, access to mortgage, and to take account of the value of any equity in the property if you are currently a homeowner. The loan will be based on the purchase price, excluding the value of cash back, white goods, carpets, furnishings, debt roll-over or other incentives in cash or kind. 7
New homes on sale from developers must qualify for the NHBC insurance scheme or equivalent. The NHBC insurance scheme gives the buyer some protection against some building defects; most national developers provide this form of insurance. The property you wish to purchase must be supported by a survey report, as commissioned by Cymdeithas Tai Clwyd cost to be borne by you. We do not require a full structural survey. This survey report is in addition to the mortgage lender s survey. Properties offered on a leasehold basis (mainly flats) must offer a remaining term of at least 60 years. The property must be your sole residence (exceptions may be made for Service Personnel who may be posted away from the area in the future). THE FOLLOWING PROPERTIES DO NOT QUALIFY FOR THE SCHEME: Properties containing any element of commercial use. (Does not include flats above shops) Most caravans and houseboats and other mobile homes (including fixed homes covered by the Mobile Homes Act 1983). Property owned or part-owned by your spouse/partner, a family member (parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew or niece), or business associate (someone who is your business partner or fellow director). Exceptions to this rule are properties involved in marriage/relationship breakdown. Properties occupied by sitting tenants. Properties in poor condition. A home offered with a subsidy or discount from a public body. 8
THE REQUIREMENTS AFTER YOU BUY A HOME THROUGH HOMEBUY When you purchase through Homebuy you will own the property outright. Like other homeowners, you will be responsible for repairs and maintenance as well as meeting your mortgage repayments. The building will need to be insured in case of fire and other risks. This gives you protection against losing your home in a disaster. The policy must show that the Association has an interest in the property. If you buy a flat, the owner of the block normally takes out the insurance and shares the cost between the owners of the flats. If you decide to sell your property, you must give written notice to the Association of your desire to dispose of the property. The written notice shall be accompanied by your authorisation for the Association to obtain an independent valuation of the market value. You will be responsible for paying the fee. You will be notified of the market value within 15 working days. Upon agreement of the market value, the Association will have a period of 6 weeks to nominate a person or persons to purchase your property. The Association has the right to nominate itself. If the Association does not have a suitable person to nominate within the 6 week period, or if an offer is made to each of the Association s nominees and each offer is refused or allowed to lapse, you will then have the right to sell your property on the open market. On completion of a sale of the Property to the Association s nominee, the Owner shall pay to the Association an administrative charge equivalent to 0.50% of the Market value of the percentage share in the ownership of the Owner at the time of completion of the sale of the Property. The above conditions are included in a Deed of Pre-emption that you will be required to sign when you purchase the property and the restriction on sale will be registered at the Land Registry. 9
Cymdeithas Tai Clwyd needs to protect its loan. Therefore the following conditions apply: You must notify Cymdeithas Tai Clwyd and obtain its approval to make alterations or improvements to the property, such as building an extension or altering the layout of the home. You must also obtain the necessary planning consent/building regulations and forward copies to the Association. Details of any alterations or improvements should be provided in writing to the Association, as they can be disregarded when repaying the loan. You must notify the Association if you need to remortgage for repairs or improvements to your home. Cymdeithas Tai Clwyd will agree to further loans, subject to terms and conditions. The Association will carry out a thorough financial assessment to ensure affordability. The open market value will be based on the value on completion of the improvements. An independent valuation must be obtained, which the Association will arrange, so that the value can be established (you will pay the valuation fee). You must advise the Association if you wish to change your mortgage company. You should contact the Association if you get into difficulties with your mortgage repayments. If you want to repay the loan, you must ask the Association for an independent valuation of the house so that the value can be agreed and the loan repaid in full (you will pay the valuation fee). When the Homebuy loan is repaid in full, the Legal Charge registered on your property will be removed, but the Deed of Pre-emption in respect of the sale of your property will remain in force. 10
A STEP BY STEP GUIDE TO BUYING YOUR HOME STEP 1 STEP 2 STEP 3 STEP 4 MAKING AN APPLICATION You will already be on a Low Cost Home Ownership register and will be contacted and asked to complete a Homebuy application form. Do not make any financial or legal commitment to buy a home at this stage. APPLICATION APPROVED/REFUSED Your application will be assessed and you will be advised in writing whether you qualify for assistance. You will be advised of the maximum purchase price limit, and size of property that you can purchase. You will be advised of the sum of the homebuy loan, and how much your percentage share will cost. (The Association can vary the percentage loan if you find a property of a lower value). You will be given up to 2 months to find a property; time limits will vary depending on amount of time the Association has by which to spend the homebuy funding allocated. FINDING A HOME When you have found a suitable property, make an offer to the vender. If accepted, inform Cymdeithas Tai Clwyd in order that a valuation report can be commissioned (you will have to pay the fee). If the valuation report is acceptable, you will be advised that you may proceed to purchase the property. You will then be able to apply for a mortgage and instruct a solicitor. You should not instruct a solicitor if you are unsure as to whether you will be able to obtain a mortgage, and you should not pay the mortgage lender any valuation fees, until you are sure that your mortgage application is approved. COMPLETION OF SALE We will require a copy of your mortgage offer and survey report carried out by the mortgage lender. The Association will keep you and your solicitor informed of the process until you have bought your home. 11
It is important to consider the costs and responsibilities of buying your own home before making a decision to go ahead. Here is a list of some of the costs that you have to pay: Survey and legal costs Stamp duty first time buyers are exempt Land Registry Mortgage repayments Mortgage payment protection and Life Assurance Building and contents insurance Repairs and maintenance Services gas, electricity, water, council tax etc Service charges if purchasing a flat. Further information on the costs of running a home that you own can be found in a number of consumer magazines or books, or on the internet. Here are some examples of useful websites: www.nationaldebtline.co.uk www.ncc.org.uk/ http://www.moneymadeclear.fsa.gov.uk/tools/mortgage_calculator.html http://www.hmrc.gov.uk/ http://www.abi.org.uk/ www.landreg.gov.uk/ www.justask.org.uk http://www.fsa.gov.uk/ http://www.which.net/ www.legalservices.gov.uk http://www.thisismoney.co.uk www.citizensadvice.org.uk YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. 12
IMPORTANT INFORMATION ON REPAYING THE HOMEBUY LOAN You may repay the loan at anytime, but it must be repaid if you sell your home. The amount you repay will depend on the condition of the housing market where you live at the date of repayment. This means you may pay more or less than the amount that you originally borrowed from Cymdeithas Tai Clwyd. If you have to repay more than you borrowed from the Association, the effect will be similar to a loan where you pay credit charges at the rate at which your home has increased in value. For example, if your home increases in value by 4% a year, the sum you will repay will be equivalent to a loan with an APR (Annual Percentage Rate) of 4. The example below shows how the loan repayment and APR equivalent would be calculated in a case where the value of the house has increased. Example: If you buy a house in Denbigh for 100,000, Cymdeithas Tai Clwyd will provide you with a loan of 30,000 (30% of the purchase price). In 5 years time, house values have risen and you want to sell your home. If we assume that house prices have increased by about 4% a year, then your home would be worth 121,665. In this example, you would repay 30% of the value when you sell your home, which is 36,499.50. As you are repaying more than you borrowed from the Association, the amount you repay would be equivalent to borrowing the money at an APR of approximately 4%. 13
For further details and an application form, please contact the Affordable Homes Team at the Association s Denbigh office by telephoning 0345 230 3140 or 01745 815220 extension 435 or 438, e-mailing affordablehomes@taiclwyd.com or visit our website www.taiclwyd.com 54 Stryd y Dyffryn, Dinbych, LL16 3BW Charitable Housing Association Reviewed April 2010 14