Homebuy Direct

mrgerrard

From the government,

What is equity sharing?
Equity sharing schemes help people to buy a home where they can't raise a mortgage to cover the full price.The buyer's share of the equity is the proportion bought with their own savings and/or a mortgage. The remaining share of the equity can be held by the former landlord, the developer, or the loan provider. When the buyer decides to sell, the holder of the remaining share of the equity receives their original investment, plus an equivalent proportion of any increase - or decrease - in the value of the home.

Where purchasers buy a new build home, we understand that there can be merit in offering shares for sale below 50%, for example in highest value areas. We welcome views on the circumstances in which there is a case to do so and whether different degrees of subsidy should be offered to different groups.

Where purchasers buy a home on the open market, the provider cannot impose the same conditions as they will not own the freehold. In such circumstances, purchasers pay for at least 75% of the home.

For at least the first five years, buyers pay no rent on remaining shares worth up to 25% of the equity, but pay an annual charge of a maximum of 3% (that is, 3% of the capital value at the time of sale, increased by RPI plus a half per year - similar to social rent) on the rest.This is a more affordable offer than current shared ownership arrangements, under which buyers are charged rent on all of the share which they don't own from the outset, and gives buyers time to adjust to the financial demands of home ownership and the opportunity to consolidate their financial position.

For New Build and Open Market HomeBuy, the annual charge of a maximum of 3% will extend to all of the remaining share after five years. Over time, as their incomes rise, people may be able to afford a greater proportion of the costs of home ownership. We want to give the maximum support when it is needed most - in the first five years of ownership - but to avoid continuing subsidy where it is not needed.

mrgerrard

Over time you would still need to purchase the remaining equity from the loan provider, this is to be done in 10% tranches and is based on the value of the equity at that point. If you received 25% for a 100000 home which had increased in value by 50% then a 10% tranch would be 15000 rather than 10000. Otherwise the rent you pay on the loan provided does not go towards paying off the property.

brummybloke

for oxfordshire, the OP's area im guessing? this is the scheme they are asking about

http://www.homebuy.co.uk/pdf/180808%20-%20Customer%20info%20-%20New%20Build%20Shared%20Equity%20-%20Moat.pdf

it may be worth asking about going on the list for the open market scheme which is what i was talking about.

the difference is that the open market scheme allows you to buy something which is established rather than a new build, and as per my other posts, has some good benefits which may save money.

brummybloke

mrgerrard wrote: »

Over time you would still need to purchase the remaining equity from the loan provider, this is to be done in 10% tranches and is based on the value of the equity at that point. If you received 25% for a 100000 home which had increased in value by 50% then a 10% tranch would be 15000 rather than 10000. Otherwise the rent you pay on the loan provided does not go towards paying off the property.

? not in any of the homebuyer schemes i have looked into you dont.
maybe the scheme is completely different in certain areas of the UK then?
in the south west you only HAVE to pay the equity back upon selling up or completion of the mortgage terms.

it is still a no lose situation, if you only own 60% then why would anyone think they could have more % than that, upon selling?

if the house has increased by 50% then so will your 60% ownership, if you buy for 100k with 40% equity loan and it goes up 50% then your £60k is now £90k. you never see the 40% at any stage so it matters not if you sell for 1 million pounds, you will still get 60% of the 1 million pounds.

the advantage is that if the house 1/2 in value, something which alot of posters on this site seem to think, then your £60k is then worth £30k, HOWEVER the repayment back would also be halved so instead of owing 40k, you would only owe 20k.
so your £100k house, you will have lost out on 30k cash, but if you did it the tradtional way, you would be down 50k.

the own home scheme has therefore saved you 20k in the event of a 50% house price crash.

there are many different slight variations of the scheme, it is down to the individual to pick the best one for themselves.

people tend to want their own HOME, a place which they live in and can enjoy, they dont which to move and up sticks every 2 years, hoping to make £3.50 on each house move. A home is somewhere to live, if people are looking at these schemes as some kind of investment tool then they are looking in the worng place.