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Open Market Home Buy for Key Workers

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Open Market HomeBuy is a Government backed scheme that allows key workers to purchase a house on the open market. This is achieved by allowing access to additional funds in the form of equity loans to supplement a conventional mortgage.

Currently, there are two options available.

Option (1) 25% equity loan.

This Open Market HomeBuy scheme allows certain groups of keyworkers to access 25% equity loan towards the purchase of a property. An equity loan means that another organisation or sometimes a person owns a share of your property. This will reduce the monthly mortgage payments, however, be advised that there are implications for this. For example, if you wish to sell and move up the property ladder, it may prove difficult. In this case you will have to repay a quarter of the sale value in the future.

The 25% equity loan comes from two very different sources. The first (a) is a 12.5% equity loan from your local HomeBuy agent or housing association. The second (b) is another 12.5% equity loan from a participating mortgage lender (currently Nationwide, HBOS, Advantage and Yorkshire BS).

From equity Loan (a) - From the housing association

No interest is payable on this part
Only when property is sold will you have to pay it back
The housing association will share in any profit or loss
Any savings in excess of £10,000 will go towards reducing your 75% mortgage
A valuation at your expense will be required if you have major alterations made to the property, you choose to repay the equity loan early, or even when you sell the property

From equity loan (b)

No interest is charged for the first 5 years
After year 5 you will be charged interest capped at 3% on the lender's equity loan
After 10 years you will pay interest at the lenders Standard Variable Rate (SVR) which is usually 1-2% above the Bank of England base rate.
The lender will share any rise in your property value when you come to sell it or redeem the loan
The lender will not share in any fall of your property value. In this circumstances they would be repaid their original loan
Lenders will require a subsequent valuation in any circumstance that may lead to redeeming their equity loan.

Please note that in some circumstances up to 2 seperate valuations may be required. One for the lender and an additional for the housing association. The cost of a valuation will depend on your property value but expect to pay in excess of £1000 in total.

Option (2) 17.5% equity loan

In 2007, the Government announced a further Open Market HomeBuy initiative. This involves applying to your local HomeBuy agent or housing association. Certain groups of people and key workers may be eligible to apply for a 17.5% equity loan towards the value of their property. You will then raise the other 82.5% through a mortgage with any lender willing to enter in to a shared equity arrangement. If your application is successful only the housing association will hold additional equity in your property.

No interest is payable on this loan
Only when the property is sold will you have to pay it back
The housing association will share in any profit or loss
Any savings in excess of £10,000 will go towards reducing your 82.5% mortgage
A valuation at your expense will be required if you have major alterations made to the property, you choose to repay the equity loan early, or even when you sell the property

You will not be eligible if the following applies to you

You have a household income of more than £60,000
You may only purchase a home within a reasonable distance from your workplace (reasonable is considered to be upto 1 hour travelling time)
You have debts totalling £15,000 or more (£20,000 in the case of student loans)
You have registered CCJs, deafults, missed payments or mortgage arrears.
You have had any problems in the past applying for a loan or mortgage
You already own a home that is deemed suitable for your requirements

Thinkcarefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

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