Homebuy Direct scheme and negative equity

bowieben2

Hi

Just over 2 years ago, my girlfriend bought a flat with the aid of my4walls, an open market homebuy scheme.

We are now looking to buy a property together and want to sell the flat.

Without having it valued we're pretty sure we're going to be in negative equity. She paid nearly £120k and were guessing it would now be valued at around £105k. She took an 80% mortgage and the rest was paid for by the scheme.

Reading through this document (mainly pages 5 and 9):

(wont let me post the URL, but its fsa.gov pdf, the first hit when you google 'homebuy negative equity')

It says: "In some cases when house prices fall, you could owe more than the house is worth. This is known as ‘negative equity’. It would make it difficult for you to move. This is a risk with any kind of mortgage.
This Open Market HomeBuy scheme may give you some protection against negative equity. If the money from the sale of the house won’t pay off all the loans, then you don’t have to pay the HomeBuy Agent its full share – just what is left over after you have paid everything else you owe.
But in these circumstances you won’t get any money from the sale – whatever money there is must go towards paying as much of the HomeBuy Agent’s loan as possible."


Does anyone have any experience of this? Or know how it works?

Thanks
Ben

bowieben2

Sorry, but... bump!

Charterhouse

How much is the mortgage for? 80% of 120k would be 96,000?

So if you sold it for 105k my understanding of the section that you have posted is that you would repay the mortgage, owe the Homebuy agent the remaining 9k, but that would be the end of it.

bowieben2

Sorry, those figures werent exact... just a rough idea.

to break it down she bought the property for £114k. She took a mortgage out for £86k, the homebuy direct scheme paid £14k, and her mortgage lender paid £14k. Were expecting to get around £100k now for the property. Which obviously will pay off the mortgage and the loan from her mortgage lender. But we dont expect there to be anything left over to pay the homebuy direct scheme. Is it correct that they will just write off this debt?

Does anyone have any experience of selling a property bought through the homebuy direct scheme and how it works? We have lots of info on buying, and how the scheme works. But its very vague on how it all works when you come to sell.

Shes going to try get through to them again today, but theyre not very helpful. The girl she last spoke to was adamant we would have to pay the whole lot back even though we were now in negative equity.

Thanks
Ben

VIGILANT22

[QUOTE=bowieben2_Shes_going_to_try_get_through_to_them_again_today,_but_theyre_not_very_helpful._The_girl_she_last_spoke_to_was_adamant_we_would_have_to_pay_the_whole_lot_back_even_though_we_were_now_in_negative_equity._Thanks_Ben[/QUOTE]


http://www.my4walls.co.uk/housing/about-the-homebuy-scheme/homebuy-direct/

"
The HCA and the house builder will provide equal equity share loans to make up the cost of your home, up to 30% of the full purchase price.

These equity loans are repaid when you sell your home, at which point you must repay the same percentage of the proceeds of the sale to the agency and the house builder as the initial equity loans. (i.e. if you received equity loans for 30% of the purchase price of your home, you must repay 30% of the proceeds of the sale)."

bowieben2

Shes just got through to someone at my4walls (homebuy direct scheme). They basically didnt know what happens now, apparantly no-one on the scheme has tried to sell their property yet! So, apparantly someone is going to phone her back!

bowieben2

Sorry, Im not sure if its different scheme, but ours is actually "open market homebuy".

In the documents we have the only reference to this situation states:

"In some cases when house prices fall, you could owe more than the house is worth. This is known as ‘negative equity’. It would make it difficult for you to move. This is a risk with any kind of mortgage.
This Open Market HomeBuy scheme may give you some protection against negative equity. If the money from the sale of the house won’t pay off all the loans, then you don’t have to pay the HomeBuy Agent its full share – just what is left over after you have paid everything else you owe.
But in these circumstances you won’t get any money from the sale – whatever money there is must go towards paying as much of the HomeBuy Agent’s loan as possible."

VIGILANT22

it is a differnt scheme then from the one you first posted "my4walls, a homebuy direct scheme".

bowieben2

I know, my apologies. It was the only scheme on their website, I didnt realise it was different and they've actually stopped the open market homebuy one. Have edited my original post.

Thanks