Open Market Homebuy and Right to Buy question

thickinthehead

Hi all,

Long time reader, first time poster.

I hope this question isn't too complicated... I have been looking into the open market homebuy scheme (the 17.5% one) as I am a keyworker and am struggling to fit my family in to my council house (2-bed, 2 adults, 1 16 year-old, 1 boy toddler and 1 girl toddler). We are eligible to be moved to a 4-bed house but we have been waiting 3 years already and will be waiting an estimated 5 more years. The problem is now critical as you would probably imagine... I had been waiting to use our sizeable discount (£38,000) on a bigger house. However, I can't wait any longer and now think that I should stick where I am and alter the property to make it bearable (only 2.5 years till my eldest goes to University). Therefore, my questions are:

Can I buy my council house under the homebuy scheme?

If 17.5% is owned by the government and I extend it at my own cost, will they get 17.5% of that increase in value? (the same goes for other home improvements like new kitchen/bathroom).

Will I pay stamp duty as the discount would take it under the threshold?

Would I be able to get some kind of equity release to make the improvements/changes and/or pay off a credit card (which would give us the extra needed on top of our existing rent to easily cover the mortgage)?


I think that will do for now although my head is swimming with questions?

tinkerbell1985

http://www.housingcorp.gov.uk/server/show/nav.2129

The version of Open Market Homebuy that you are talking about no longer exists, see all the info below regarding the new schemes released as of April 1st 2008.

This website will tell you all you need to know about MyChoice HomeBuy and Ownhome.

The schemes are designed to help anyone on a household income between £20,000 - £60,000, but certain people will have priority. Including Keyworkers (NHS Nurse, Teachers, Firefighters etc etc), those in housing association/local authority properties, those registered as priorities on the local Housing Register and other priority groups recommended by the Regional Housing Board.

I work for one of the Homebuy Agents in the South so I deal with Low Cost Home Ownership on a day to day basis.

I think depnding on where you live will depend on how 'easy' it is to get onto the housing register. They don't neccesarily take just anyone on. The Housing Register is there for people with a genuine housing need. You can only find out by asking though - I imagine it may be different all over the country.

As for if you can take out a secured loan to purchase the rest of the property, I would say that is highly doubtful. On the old Open Market Homebuy (OMHB) scheme you were only able to remortgage and further borrow to help with home improvements, not to consolidate loans or something like that. Whoever you take the loan from (the housing association for My Choice HomeBuy, or Places For People for OwnHome) will have a 2nd charge on the property, so would have to agree to secured loans being taken out and this is highly doubtful as it would put their investment at risk. I'm not 100% about that as the new scheme was only introduced on 1st April & so we have no clients ready to pay back the loan on the new scheme yet, but this is what I would believe to be the case!

The Schemes

My Choice gives you a loan between 15-50%
Own Home gives you a loan between 20-40%

The My Choice HomeBuy scheme has an interest charge on the loan given of up to 1.5% per annum (payable monthly)

Whereas the OwnHome (through Places for People) have no payments on the loan for the first 5 years, then in years 6-10 there is a fixed interest rate of 1.75%, then in year 11 the interest rate is 3.75%.

My Choice allows you to gain a mortgage through any High Street Lender (so main banks and building societies) NOT sub prime lenders.

With Ownhome, the mortgage has to be through The Co-operative Bank (although they offer various mortgage products)

I hope this helps people thinking about purchasing a property through the Low Cost Home Ownership schemes. They are very good schemes, so definitely worth thinking about!




The link at the top is to the Housing Corporation (who govern all the housing associations & schemes etc). This site will provide you with the contact details for your local Home Buy Agent (Zone Agent) who will accept your applications for the Low Cost Home Ownership scheme.

Sorry to ramble on!!!

thickinthehead - If you were to purchase a property you can either do RTB OR the Homebuy scheme - they cannot be moxed, so you will either receive a loan (Homebuy) or the discount (RTB) not both.

WIth the Homebuy schemes, if you were to make any improvements I would recommend contatcing the housing association who lent you the money just to inform them of the changes you will be making. They will normally take into consideration any improvements which have enlarged the floor space ie. an extension or conservatory. Very often kitchens and bathrooms will not add much value to a property - unless they were high spec. As long as you have informed the HA of the changes, they will take this into account when the loan is being paid back and will not take a cut of the value YOU have added to the property. This is the case in the South, where I work for a Homebuy Agent who deals with Shared Ownership & Homebuy. I would not like to make guarantees about this, but I presume this is the norm all over.

Stamp duty is no longer payable on Shared Ownership - under 80% shares, but IS still payable on the Homebuy scheme - My Choice & Ownhome. Regardless of how much you borrow from them.

You can remortgage to do home improvements, but not equity release and you can't remortgage to pay off or consolidate loans.

I hope this helps!

thickinthehead

Thank you Tinkerbell for such a comprehensive response.

I managed to get the answer from the HA about RTB and Open Market Homebuy. However, I only realised a few days ago that the scheme had changed to one that was far better. I am reluctant to give up my RTB, but it really is too much living in my tiny house with 2 adults, 1 teenager and 2 toddlers. Plus, I can't afford to buy my house at the discounted rate, so my only option is to use the new scheme. I will have to get a mortgage on my own as my husband is now self-employed, so I'm not sure of the actual amount I could borrow (I earn 18K and get 10K in tax credits). I have actually seen a house I love for 220K that could potentially come down to 200K. I think we could stretch to a mortgage for 100K. However, I don't know if the agent would consider it too big. Do they just consider how many bedrooms it has (which is 4 and I have a 4-bed need)? Or would they think that having 3 reception rooms (2 lounge, 1 dining room) downstairs as well would be greedy? I can justify a need for that much room to myself as we have been starved of it for so long, and I could really use a study so I could have somewhere to work from home, but I don't know if the agent would think the same way....