HomeBuy – what is it, and what does it mean?

On 1 April 2006, the Government launch the new HomeBuy scheme to help enable social tenants, key workers and other first time buyers to buy a share of a home and get a first step on the housing ladder.

There are three different HomeBuy products available:

New Build HomeBuy (what was formerly known as shared ownership): This enables people to buy a share of a newly built property, paying a rent on the remainder.

• Purchasers will buy a minimum initial purchase of 25% of a newly built home. A housing provider (such as Midsummer) will hold the remainder of the equity. The provider will be able to levy a charge of up to 3% on their equity. A lower target average for the charge is set at 2.75%.

• Purchasers may buy further shares in their home when they can afford to do so – a process known as ‘staircasing’.

Open Market HomeBuy: This enables people to buy a property on the open market with the help of an equity loan.

• This scheme is offered by the HomeBuy Agent for each county. Click here to view details of each HomeBuy Agent:

• This scheme is primarily for key workers but will be available on a more limited scale to social tenants and other priority first time buyers.

• Purchasers will be expected to raise finance to purchase around 75% of a home on the open market. A housing provider will provide a loan of up to £50,000 for the balance required.

• The loan must be repaid when the purchaser sells their home or ceases to be a key worker. The amount to be repaid will be the same percentage (eg 25%) of the value of the home.

• Further changes are expected to be made to this HomeBuy option later in 2006.

Social HomeBuy: This enables tenants of local authorities and housing associations to buy a share in their current home at a discount. This scheme is only operating within certain areas and not nationwide. Midsummer does not currently offer this scheme.

• Tenants can purchase a minimum initial share of 25% of a home. The remainder of the equity will be retained by their landlord who will be able to levy a charge of up to 3% of the capital value of their retained equity. A lower target average for the charge has been set at 2.75%.

• Buyers will receive a discount on the initial share purchase. This will be the Right to Acquire discount (generally between £9,000 and £16,000 – depending on the local authority), pro-rata to the share purchased.

• Social HomeBuy does not apply to properties which are exempt from the statutory Right To Acquire scheme, including properties in areas designated as rural.

Tenants should contact their landlords to see if they are participating in the scheme and for further details.