Keyworker Schemes - "Good move or Bad Move?"

NotU2

This is my first visit to MSE Forum so forgive my newbieness.

Has anyone had experience of the keyworker scheme to buy a home? Is it to be avoided like the plague or are their some benefits as house prices are rediculously high?

Many thanks,

Notu2

Bargain_Rzl

There are several different types of keyworker schemes, and as such, each has its own pros and cons.

I have a shared ownership (not "shared equity") flat, though I'm not a keyworker - and could give advice on this if you have specific questions. There are others on here who could advise on other schemes, such as shared equity or keyworker capped rental.

Have you done any of your own research? Were you considering anything in particular?

ManAtHome

There are some drawbacks http://news.bbc.co.uk/1/hi/programmes/moneybox/6437627.stm - biggest one seems to be that rents go up in line with RPI (even this only measures inflation if you're earning over £30k in my opinion) but wages are expected to track CPI (which I call the Cheese (sarnie) and Plasma (telly) index - only really works if you survive on cheese sarnies and buy 2 plasma tellys a year).

Bargain_Rzl

ManAtHome - as I said in my previous post, schemes differ. Rent rises would have to be taken into account if the OP was considering a Shared Ownership scheme (part buy part rent) but they would be immaterial if it was a Shared Equity/Open Market Homebuy scheme (the one where there is no rent to pay but you have to give back a proportion of the proceeds when you come to sell the property).

If the OP chould be a bit more specific about what s/he is considering, it would be easier to point out pros and cons.

Unclebob_3

Hiya,
I am in a similar situation as I have currently had an application approved for a government home buy scheme (open market homebuy), and although I am not a key worker, the scheme I've applied to does favour applicants who are keyworkers.
It does depend on the scheme you are referring to, but in the case of the above scheme, having asked lots of people lots of questions I came to the conclusion that it is a good idea.
In summary, the drawbacks are as follows:
1. If you change job you may no longer be elligible for the scheme.
2. The open market home buy scheme makes it difficult for you to move house - if you do want to move you will have to repay the equity loans.
3. If your application is successful you may have a very small timescale in which to find a suitable property (we have been given 6 weeks to find a property!). This can be stressful.
4. The scheme restricts you to certain lenders for your mortgage. The four lenders have many complicated rules (as does any mortgage) but basically you probably won't be allowed to make overpayments on your mortgage for the first five years without penalty. Also, any deposit you have is used to reduce the government's equity loan rather than the mortgage for three of the lenders. The fourth lender (Advantage) will allow you to use your deposit to reduce the amount you borrow on the mortgage without reducing the government's equity loan. However, unless you have an enormous deposit, don't use this lender as their interest rates are very high in the 3rd, 4th and 5th years.
The benefits are as follows:
1. 25% of the value of your house is interest free for 5 years (although the amount you pay back is proportional to the increase or decrease in property value).
2. In the short term at least you can buy a more expensive property, which in our case means a larger property in a nicer area as opposed to the runt of the house we could afford otherwise!!
3. You can choose when to pay back the equity loans. If you are smart about this you will save and pay back the equity loans when the market is not so good - pay them back in full or in part when your house is worth least.
4. The government equity loan (12.5%) never attracts any interest.

These shemes are infinitley complicated and I have not had much joy finding people who understand them, so I wish you luck!

Let me know how you get on!

Unclebob_3

Hiya,
I am in a similar situation as I have currently had an application approved for a government home buy scheme (open market homebuy), and although I am not a key worker, the scheme I've applied to does favour applicants who are keyworkers.
It does depend on the scheme you are referring to, but in the case of the above scheme, having asked lots of people lots of questions I came to the conclusion that it is a good idea.
In summary, the drawbacks are as follows:
1. If you change job you may no longer be elligible for the scheme.
2. The open market home buy scheme makes it difficult for you to move house - if you do want to move you will have to repay the equity loans.
3. If your application is successful you may have a very small timescale in which to find a suitable property (we have been given 6 weeks to find a property!). This can be stressful.
4. The scheme restricts you to certain lenders for your mortgage. The four lenders have many complicated rules (as does any mortgage) but basically you probably won't be allowed to make overpayments on your mortgage for the first five years without penalty. Also, any deposit you have is used to reduce the government's equity loan rather than the mortgage for three of the lenders. The fourth lender (Advantage) will allow you to use your deposit to reduce the amount you borrow on the mortgage without reducing the government's equity loan. However, unless you have an enormous deposit, don't use this lender as their interest rates are very high in the 3rd, 4th and 5th years.
The benefits are as follows:
1. 25% of the value of your house is interest free for 5 years (although the amount you pay back is proportional to the increase or decrease in property value).
2. In the short term at least you can buy a more expensive property, which in our case means a larger property in a nicer area as opposed to the runt of the house we could afford otherwise!!
3. You can choose when to pay back the equity loans. If you are smart about this you will save and pay back the equity loans when the market is not so good - pay them back in full or in part when your house is worth least.
4. The government equity loan (12.5%) never attracts any interest.

These shemes are infinitley complicated and I have not had much joy finding people who understand them, so I wish you luck!

Let me know how you get on!