Guidance

HomeBuy Direct Buyers' Guide (accessible version)

Published 8 November 2010

This guidance was withdrawn on 26 March 2024

This content has been withdrawn as this scheme is now closed. Visit Own Your Home for information on other schemes.

Applies to England

This scheme is now closed for applications, but you can find other home ownership schemes on Own Your Home.

What is HomeBuy Direct

HomeBuy Direct is an affordable housing assistance product from the Homes and Communities Agency, working in partnership with housebuilders. It aims to make more new affordable homes available to eligible buyers priced out of the housing market.

HomeBuy Direct is available in England and only on selected sites for a limited time period. This guide provides an overview of the product. If you’d like to know more, or are interested in applying, please contact your Local HomeBuy Agent.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Check that these mortgages will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.

The ‘stepping­ stone’ into home ownership

With HomeBuy Direct, the buyer (‘you’) buys a new home on an approved HomeBuy Direct development with assistance from both the Homes and Communities Agency (‘the Agency’) and the housebuilder in the form of two equity loans.

You must take out a first mortgage (with a qualifying lending institution). This mortgage, together with any cash contribution from you, must be a minimum of 70% of the full purchase price.

The Agency and the housebuilder will provide equal equity loans to fund the balance needed to make up the full purchase price of your home, up to a maximum of 30% of the full purchase price. These equity loans must be 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 housebuilder 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).

In addition, you can, if you wish, make voluntary part repayments of the equity loans (‘staircasing’) after twelve months.

The equity loans are interest free for the first five years. After that, you will pay a fee on each of the equity loans of 1.75%, rising annually by the Retail Price Index (RPI) plus 1%. If you purchase a home through HomeBuy Direct, you will have 100% title to your home and you can sell it on the open market without restriction, subject to the repayment of the equity loans.

Local HomeBuy Agents will assess and approve your eligibility for HomeBuy Direct, and you need to be confirmed as eligible before you proceed with the buying process. Further details on all these points and the buying process are set out within this guide.

 What the scheme allows you to do

HomeBuy Direct enables eligible buyers to purchase a new property, funded by an affordable mortgage and with help from the Agency and the housebuilder, on a designated HomeBuy Direct development.

This enables you to take out an affordable mortgage (minimum 70% of the total purchase price) on which you make repayments in the normal way. The rest of the purchase price will be paid for with equity loans from the Agency and the housebuilder.

As a result of providing this assistance, the Agency and housebuilder then both have an entitlement to a share of the future sale proceeds equal to the percentage contribution required to assist your purchase.

For the first five years of HomeBuy Direct home ownership there is nothing to pay on the amount that the Agency and housebuilder contributed to your purchase. After five years, both equity loans will be subject to a fee (collected from you on behalf of the Agency and house builder by the National HomeBuy Agent) of 1.75% per annum on the outstanding amount of the equity loans. This fee will increase each year by the RPI plus 1%.

The equity loans supporting your initial purchase mean HomeBuy Direct is a ‘stepping­stone’ to assist buyers into full home ownership.

When you sell your HomeBuy Direct home, you must repay the HomeBuy Direct assistance from a share of the sale proceeds. So, if the Agency and the housebuilder initially assisted your purchase with a 30% contribution, your repayment will be 30% of the total market value when it is sold. Turn to page 10 to see what happens if values have fallen.

After 12 months of ownership you can also choose to make voluntary part repayments (‘staircasing’) of the HomeBuy Direct assistance at the prevailing market value. The minimum voluntary repayment is 10% of the market value at the time of repayment.

The Agency’s and housebuilder’s entitlement to a share of the future sale proceeds is secured through second charges on your home. This is done in the same way that your mortgage lender will secure its lending through a first charge on your home.

Although, if you buy through HomeBuy Direct, you will have a mortgage for less than the full purchase price of the property, you will be the legal owner with 100% title to your home.

Example of HomeBuy Direct home ownership

Example of HomeBuy Direct home ownership	Price	Percentage
Open market price of new home	£200,000	100
HomeBuy Direct buyer affordable mortgage at 65%	£130,000	65
HomeBuy Direct buyer pays 5% deposit	£10,000	5
HomeBuy Direct buyer total contribution	£140,000	70
Agency and housebuilder assistance 30% equity loan (via two equity loans at 15% each)	£60,000	30

The role of the HomeBuy Agent

The Local HomeBuy Agents act on behalf of the Agency to signpost eligible applicants towards HomeBuy Direct schemes in their area, administer these schemes, as well as to guide you through the process of buying your HomeBuy Direct home. The role of the Local HomeBuy Agent is to:

• act at a local level on behalf of the Agency
• hold information about HomeBuy Direct schemes for prospective buyers
• deal with applications, assess eligibility and affordability, and offer guidance to prospective buyers, and
• give approval to a HomeBuy Direct buyer’s solicitor/conveyancer to proceed with a purchase (exchange of contracts). 
 Following the HomeBuy Direct sale, your details will be transferred to the National HomeBuy Agent. The role of the National HomeBuy Agent is to provide a single point of contact to:
• administer payment of fees by buyers on the HomeBuy Direct equity loans after five years of ownership, and
• recover the equity loans repayments as owners sell and move on or staircase.

 Where you can find HomeBuy Direct homes

HomeBuy Direct homes are only available on designated developments where the Agency has an agreement with the housebuilder to offer homes for sale through the HomeBuy Direct programme. 


Eligibility

HomeBuy Direct homes are available to households who cannot afford to buy a home on the open market and have a household income of less than £60,000 per annum. Priority will be given to first time buyers whose household income is less than £60,000.

Applicants should be buyers looking to own a home for the first time, although if you are looking to buy a new home after a relationship breakdown you will also be considered.

Qualifying criteria for all applicants

You must:


• be a qualifying buyer unable to afford a home in their local market. Applicants must not be able to buy a home suitable for their housing needs within a reasonable travelling distance of their work place, without assistance
• be able to demonstrate access to savings or sufficient funds to pay, if required, a deposit (which may be 5% or more of the purchase price), legal fees, stamp duty and other costs of moving
• be able to sustain home ownership in the longer term. Typically, applicants will be employed on a permanent contract of employment (there are exceptions for key workers). If self-employed, the applicant must be able to provide accounts for the last three years
• not already be home owners or named on a home mortgage. If an applicant has had their name on a mortgage they will have to provide evidence that it has been (or is in process of being) removed
• take out a first mortgage with a qualifying lender
• have a good credit history ­


If you have rent arrears during the last 12 months, are in breach of your current tenancy agreement or have an adverse credit history which means you are unlikely to be able to sustain ownership, you will not be eligible for HomeBuy Direct.

If the rules change after I purchase a home

You eligibility status will be judged against the criteria at the time you are given financial help to buy your home. So if the scheme rules change you will not be affected.

How to buy a HomeBuy Direct home

There are a number of stages you’ll need to go through to buy a HomeBuy Direct home.

Stage 1: register interest and ensure you have funds to pay

1. Register your interest with your Local HomeBuy Agent, either directly with the Agent or via the housebuilder.
2. Complete a HomeBuy Direct application either online or on a paper copy and submit it to your Local HomeBuy Agent
3. See an Independent Financial Advisor (IFA) to gain confirmation of financial status. The Local HomeBuy Agent will be able to suggest some IFAs for you to try. Some Local HomeBuy Agents may also require you to attend a financial interview before giving eligibility approval
4. You must ensure you have funds to pay, such as:


• a reservation fee if required
• deposit on exchange if required (a deposit is typically 5% although some schemes may require higher or lower deposits at exchange of contracts)
• other fees on completion – for example stamp duty or legal fees

Stage 2: Your eligibility is assessed

Your Local HomeBuy Agent assesses your eligibility.

If eligible, you will receive an ‘Approval of Eligibility Letter’ from your Local HomeBuy Agent within eight working days of submitting a full application. You also receive details of the level of mortgage you should be seeking (your ‘Prescribed Mortgage Level’).

Your Local HomeBuy Agent provides details of the applicable HomeBuy Direct schemes in your area.

Stage 3: Find a property

1. If you have not already done so, you make appointments with sales teams at HomeBuy Direct schemes.
2. When you’ve found a suitable property, you complete a ‘Property Information Form’ and return it to your Local HomeBuy Agent together with details of your solicitor/conveyancer and a copy of the housebuilder’s completed reservation form.
3. You pay a reservation fee, if required, usually up to £500, to the housebuilder.
4. You instruct a solicitor to act for you and tell your IFA so that a full mortgage application can be submitted.

Stage 4: Authority to Proceed and checks

1. Your Local HomeBuy Agent reviews the ‘Property Information Form’ ensuring it is consistent with the terms of your approval letter.
2. If it is, your Local HomeBuy Agent issues an ‘Authority to Proceed’ and instructions to you and your solicitor/conveyancer. This pack will include legal documents that will be explained to you by your solicitor/ conveyancer.
3. You agree to exchange contracts within a timeframe specified by the housebuilder (usually 21­28 days).
4. Your solicitor/conveyancer checks that your mortgage offer, property price and available funds are consistent with the Authority to Proceed, and requests permission to exchange contracts from the Local HomeBuy Agent.
5. Your Local HomeBuy Agent issues approval to your solicitor/conveyancer and contracts are exchanged.
6. You will have paid a deposit if required and are now legally contracted to complete the purchase by an agreed date. 


 Stage 5: Moving in and repayment

At completion, your lender provides its funds and the Agency will make its funds available to the housebuilder. Once completion has taken place you own the property and can move in. Your solicitor returns confirmation of the sale to your Local HomeBuy Agent who then registers your details with the National HomeBuy Agent.

Two equal ranking second charges are placed on your home by your solicitor in favour of the Agency and housebuilder, entitling it to a share of the future sale proceeds. The charges will be equivalent to the percentage contribution made towards the purchase price. You must repay the percentage contribution when you sell your home or after 25 years (whichever is earlier).

 How long the process takes

Your Local HomeBuy Agent will seek to assess your eligibility (from a fully completed application form, together with all the other documents they may require from you) within eight working days.

After receiving confirmation of your eligibility it is up to you how soon you find a property and submit a ‘Property Information Form’ to your Local HomeBuy Agent.

Your Local HomeBuy Agent’s ‘Authority to Proceed’ is valid for three months – the time limit for exchange of contracts. Typically, most housebuilders will be seeking buyers to exchange contracts within one month of making a reservation.

You are responsible for securing your mortgage and appointing your solicitor/conveyancer, although your Local HomeBuy Agent and housebuilders will be able to suggest some options. HomeBuy Direct homes are only available on selected sites. You should contact your Local HomeBuy Agent to find out more about availability of HomeBuy Direct homes in your area and to make an application.

 What happens to your HomeBuy Direct home if you pass away

This depends on whether you bought your home alone or with others.

If you bought the house/flat on your own and you die, the home will be passed on in the normal way under the terms of your will and the payments explained in this guide will be made by your estate in accordance with the scheme. If you have not made a will it will pass under the laws of intestacy.

It is recommended that a sole buyer seeks independent legal advice about this. If you bought your home with others and one of them dies, their interest in the property will either be transferred to the surviving co owner (s) or will pass under the terms of their will, or (if there is no will) the laws of intestacy.

It is recommended where there are two or more owners, that they seek independent legal advice about this.

If your partner or friend wants to move into your HomeBuy Direct home

Any person aged eighteen years old or above must sign a form of consent that they have no interest in the property and have sought independent legal advice in relation to their rights. This will be required before the Local HomeBuy Agent consents to the exchange of contracts.

If you partner moves out and no longer wants to be party to the equity loan agreement

The National HomeBuy Agent will be able to arrange for a ‘Deed of Release’ which will release your partner from the obligation of having to repay the equity loan, but first this will need to be approved by the Agency and the house builder to whom the equity loan is owed. Assuming that your first charge mortgage lender is content for this to take place and that you are able to provide evidence that you can meet your housing costs and still have a reasonable standard of living, permission should be a formality.

 How long it takes before you can move in

Because HomeBuy Direct homes are generally on new developments (and may still be under construction), in common with most new home sales, you will normally be expected to arrange a mortgage and exchange contracts within one month of paying your reservation fee.

Your moving in date may depend on the time required to complete construction work, which will vary from scheme to scheme.

Some HomeBuy Direct applicants may need to wait for a longer period of time for a home that matches very specific needs whereas others may buy from a development that allows earlier occupation.

If the completion of your home is delayed

Once you have committed to buy a home (at exchange of contracts) the housebuilder will have agreed to build the home and keep you informed of progress.

If you are unhappy about any delays in construction you must speak to the housebuilder. Your solicitor/conveyancer will be able to advise on the housebuilder’s contractual responsibilities before you agree to the sale.

Funding on HomeBuy Direct sites is time limited. You should check with your house builder that the funding will be available on the date you expect to complete your purchase.

Your mortgage

How much you can contribute and how your mortgage level is assessed.

 How your mortgage level is assessed

Your mortgage is designed to be affordable relative to your income. Your Local HomeBuy Agent will ensure you maximise your mortgage while having regard for the overall affordability of your repayments.

Typically, your mortgage will be based on a multiple ranging from three to four times your household income. Your Local HomeBuy Agent will also work to a guideline to ensure that your monthly costs (mortgage, service charges and fees) are no more than 45% of your net disposable income.

You cannot choose to take a lower mortgage if your affordable income multiple suggests you can afford and sustain a higher one. This is because the scheme is designed to assist buyers by giving them only just enough help to achieve home ownership.

With only limited resources available, the Agency is seeking to help as many buyers as possible, and allowing a buyer to reduce their mortgage could stop others from also benefiting from the initiative.

Once you have had your eligibility approved your Local HomeBuy Agent will set the ‘Prescribed Mortgage Level’. This is the level of mortgage that you should be seeking from your lender.

Minimum contribution

Your minimum contribution must be 70% of the full purchase price which can be made up from your mortgage and your cash deposit contribution and any other savings.

Your required contribution will be assessed by your Local HomeBuy Agent and confirmed to you when you are approved to purchase under the scheme. This assessment will include the estimated amount of mortgage you should seek to obtain.

Maximum contribution


To ensure that funding can be used to help as many buyers as possible, HomeBuy Direct purchasers are always expected to maximise their contribution to a reasonably affordable level. This is assessed by your Local HomeBuy Agent. If you could afford more than 85% of the full purchase price you will not receive HomeBuy Direct assistance.

 Who provides the contribution for HomeBuy Direct

There are two contributions: one from the housebuilder and one from the Agency. The contributions are made equally and secured by the equally ranking second charges on your property title registered at Land Registry.

Agency and housebuilder: receiving correct share when the equity loan is repaid

The Agency’s and house builder’s equity loans will be secured through two equal ranking second charges registered on your property title at Land Registry, this process will be undertaken by your solicitor. This means your property cannot be sold in the future unless the Agency’s and housebuilder’s equity loan percentage is repaid.

You must agree to these legal charges being secured on your home before your purchase can be completed. Your HomeBuy Direct documents include other obligations such as the requirement for you to insure your property.

Your solicitors/conveyancer will advise you on the legal implications of your obligations and these documents before they are signed.

If you sell your HomeBuy Direct home

When you sell your HomeBuy Direct home, you will repay the Agency’s and housebuilder’s equity loan simultaneously. So if you initially purchased with a 65% mortgage and a 5% cash deposit and have made no other staircasing repayments, you will repay the Agency 15% of the value and the housebuilder 15% at the time you sell.

The National HomeBuy Agent will collect the Agency’s repayment.

You can sell your home at any time when an independent surveyor must decide what it is worth. Your property must be sold on the open market at the prevailing market valuation. If there are any fees, for example, arrears at the time of selling, these must be paid before the sale is completed.

The HomeBuy Direct equity loans must be repaid when you sell your home. You will pay the costs of selling.

The examples of how the equity loan repayment is calculated assuming a HomeBuy Direct home starting value of £200,000 and a buyer taking on a mortgage for 65% and paying a 5% deposit. Your solicitor/conveyancer will be able to provide more illustrations when they advise you on your purchase.

Example

If the buyer chose to sell their HomeBuy Direct home at the start of year six (after owning the property for five years) and assuming property values increased by 2% every year, the buyer would receive an estimated £220,816 from the sale. The buyer would then use this to settle any outstanding balance on their main mortgage and to repay the £66,245 HomeBuy Direct equity loans.

Start year	Estimated annual change in property price %	Total property value	HomeBuy Direct home owner your entitlement to 70% of property value	Agency and housebuilder entitlement to 30% of property value
1	2	£200,000	£140,000	£60,000
2	2	£204,000	£142,800	£61,200
3	­2	£208,080	£145,656	£62,424
4	2	£212,242	£148,569	£63,672
5	2	£216,486	£151,541	£64,946
6	2	£220,816	£154,571	£66,245

If your property value falls

When you sell your home, the HomeBuy Direct equity loan documents commit you to repay a percentage of the market value equal to the percentage contribution of assistance received. This means if the market value of your property falls below the level at which it was first purchased, you will repay less than the original amount the Agency and the housebuilder contributed to the original purchase.

You must always show that the proposed sale value is at the prevailing market value before going ahead. The National HomeBuy Agent must approve the sale before allowing the second charges to be released.

As long as you have complied with all your obligations in the HomeBuy Direct mortgage deeds, you will not be required to provide for any shortfall in the equity loan if you sell when values have fallen.

If you do not comply with the terms of the HomeBuy Direct mortgage deeds, the Agency and the housebuilder will seek to recover all the money they are owed.

Your solicitor will explain the HomeBuy Direct mortgage deeds to you before the property is purchased.

Example

If no capital repayment has been made on the main mortgage, repayment of the £140,000 mortgage from sales proceeds would leave £49,051 to contribute to the repayment of the
£56,715 equity loan.

Start year	Estimated annual change in property price %	Total property value	HomeBuy Direct home owner your entitlement to 70% of property value	Agency and housebuilder entitlement to 30% of property value
1	-5	£200,000	£140,000	£60,000
2	-5	£190,000	£133,000	£57,000
3	­-5	£180,500	£126,350	£54,150
4	5	£171,475	£120,033	£51,443
5	5	£180,049	£126,034	£54,015
6	5	£189,051	£132,336	£56,715

If you do not comply with the terms of the HomeBuy Direct mortgage deeds, the Agency and the housebuilder will seek to recover all the money they are owed. This will result in a balance of £7,664 remaining on the equity loan. In this circumstance, the buyer will not be asked to settle the balance.

Staircasing

The HomeBuy Direct scheme allows you to repay all or part of your equity loan. A partial repayment is called ‘staircasing’. Staircasing payments can be made after 12 months of ownership and must be a minimum of 10% of your home’s prevailing market value – whether that value is more or less than when originally purchased.

An independent RICS surveyor/valuer must provide a valuation of your property and you will be responsible for the associated cost. Enquiries about staircasing payments should be made to the National HomeBuy Agent.

If you staircase after five years of ownership, the fees you pay on your HomeBuy Direct equity loans will reduce because your outstanding loan percentage is smaller.

If you extend your mortgage to fund your staircase, your mortgage repayments will probably increase to reflect the fact that you have repaid some of the equity loan.

Example

A buyer chooses to staircase by 10% to 80% at the start of year six (after owning the property for five years). Assuming property values increased by 5% every year, the buyer would have to repay £25,526 to increase their share of the future property value.

If the buyer has any outstanding equity loan fees at the time of staircasing, these arrears must also be paid at the same time as the staircasing payment is made.

Your solicitor/conveyencer will be able to provide more illustrations when they advise you on your purchase.

Start year	Estimated annual change in property price %	Total property value	HomeBuy Direct home owner your entitlement to 70% of property value	Cost to HomeBuy Direct homeowner staircasing by 10%	After staircasing HomeBuy Direct homeowner your entitlement to 80% of property value
1	5	£200,000	£140,000	Not applicable	Not applicable
2	5	£210,000	£147,000	£21,000	Not applicable
3	­5	£220,500	£154,350	£22,050	£176,400
4	5	£231,525	£162,068	£23,153	£185,220
5	5	£243,101	£170,171	£24,310	£194,481
6	5	£255,256	£178,679	£25,526	£204,205

Stamp Duty

The Government’s standard rules and procedures for Stamp Duty Land Tax (SDLT) apply to all HomeBuy Direct purchases.

SDLT is payable at the time of purchase, on the full purchase price of the home. That is, the amount paid by you (the first mortgage and any cash contribution) plus the value of the HomeBuy Direct assistance.

There is no further SDLT to pay on any ‘staircasing’ repayments or repayment when the home is sold.

You should budget for SDLT on the full open market price of the property when you purchase a HomeBuy Direct home.

Subletting

You cannot sublet a HomeBuy Direct, they are designed to assist you to get on the housing ladder. If you wish to sublet, you will first have to repay the HomeBuy Direct equity loan assistance.

Second homes

HomeBuy Direct is designed to assist you to get on the housing ladder. If you wish to purchase another home you will have to repay the HomeBuy Direct equity loan.

Can I use cash from my council, Housing Association or other public sector body to buy with the addition of help through HomeBuy Direct?

No – assistance through government key worker or other programmes cannot be combined with any other publicly funded home ownership scheme such as HomeBuy Direct.

 Using cash from your council, housing association or other public body

You cannot have assistance through government key worker or other programmes cannot be combined with any other publicly funded home ownership scheme such as HomeBuy Direct.

 Increasing your mortgage or take out another loan after you’ve purchased your Home

Not without permission from the National HomeBuy Agent. Further advances must be approved by the National HomeBuy Agent.

Advances to be used for staircasing or repaying the equity loans will usually be welcomed and approved. Advances for other purposes will be considered by the National HomeBuy Agent on a case by case basis (see question below regarding extending or altering the property).

You can transfer your mortgage to another qualifying lending institution, following prior permission from the National HomeBuy Agent. However, you must ensure your new lender is informed that your home is a HomeBuy Direct property with a second charge entitling both the Agency and the house builder to a share of the future sale proceeds.

The National HomeBuy Agent may decline permission for further advances or transfer to another lender if after assessment they consider you may be putting yourself in an unsustainable financial position.

Restrictions on the mortgage provider

Your HomeBuy Direct mortgage must be from a qualifying lending institution. These include lenders who are authorised under the Financial Services and Markets Act 2000, and who have permission to enter into regulated mortgage contracts. This is likely to include most banks and building societies.

The Financial Services Authority keeps a register of authorised persons on its website.

Your solicitor/conveyancer will check that the lender is compliant before a sale can proceed.

Fees and costs

Typically every month, you will need to make payments in addition to your normal monthly outgoings, including:

• mortgage repayments to lenders

• after five years, fees on the HomeBuy Direct equity loan 
* service charges, if you buy a house or flat with shared areas that require maintenance `
• council tax

• life insurance and payments into investment products if the mortgage is interest only
• buildings insurance
*utility bills and other costs of occupying the property

How fees are calculated

If you have not repaid in full your HomeBuy Direct equity loans, after five years you will be required to pay a fee on each of the loans of 1.75%, rising annually by the increase (if any) in the Retail Price Index (RPI) plus 1%.

This fee is payable to the National HomeBuy Agent.

The fee payment is not made for the first five years. After this date a monthly fee will be payable and the table below illustrates how this would work on HomeBuy Direct equity loans totalling £60,000.

Your solicitor/conveyancer will be able to provide more illustrations when they advise you on your purchase.

Start year	HomeBuy Direct equity loan assistance	Estimated RPI %+1	Fee percentage	Annual fee due	Estimated monthly payment
1	£60,000	6%	0%	Not applicable	Not applicable
2	£60,000	6%	0%	Not applicable	Not applicable
3	­£60,000	6%	0%	Not applicable	Not applicable
4	£60,000	6%	0%	Not applicable	Not applicable
5	£60,000	6%	0%	Not applicable	Not applicable
6	£60,000	6%	1.75%	£1,050	£88
7	£60,000	6%	1.86%	£1,113	£93
8	£60,000	6%	1.97%	£1,180	£98
9	£60,000	6%	2.08%	£1,251	£104
10	£60,000	6%	2.21%	£1,326	£110

Fees after 5 years

The fee structure is intended to encourage you to staircase and move to full ownership. The introduction of fees after five years also takes into account that you benefit from living in your own home, made possible by the Agency and the housebuilder contributing part of the purchase price until your property is sold.

The fee is not introduced until the start of year six, which means that you have a five year period of zero fees at a time when most first time buyers are usually the most financially stretched.

The future rate of inflation cannot be predicted but you should assume your fees will always rise. The example shown above assumes annual inflation as measured by the RPI is 5% making the annual fee increase by 6%, from 1.75% to 1.86%, in year seven. By the start of year ten, if the same rate of inflation is maintained, the fee would be 2.21% equating to £110 per month based on the original equity loans totalling £60,000.

Your payment of fees does not contribute towards repaying your HomeBuy Direct equity loans. If you staircase or want to make full repayment of the equity loans, any fee arrears must be repaid at the same time.

 How you fee is collected after five years of ownership

The National HomeBuy Agent will collect your fee monthly by direct debit or standing order. They will contact you at least a month before your fees are due, to set up your repayment arrangement.

You will also receive a statement each year confirming when your fees are payable. The annual statement will also show any payments you have made once you start paying the fee. Fees can be paid in a single yearly payment or in monthly instalments.

 If there’s a change in circumstances and you need financial help

Because HomeBuy Direct fees are not classified as rent, you may not qualify for Housing Benefit. You should make sure you have made arrangements to ensure you can continue to make you HomeBuy Direct payments if your income falls. You should seek independent financial advice about this before purchasing a HomeBuy Direct home.

Annual Percentage Rates (APR) for HomeBuy Direct owners

Because you have to pay fees on your HomeBuy Direct equity loan during your ownership, and you may have to pay more than the original contribution back to the Agency and housebuilder, the effect will be similar to a loan under which a buyer pays credit charges at a rate dependent on the growth in house prices combined with the percentage rates of fees payable.

The previous illustrations demonstrated separately the effects of house price changes and fees on the costs a buyer would have to pay starting with a £200,000 market value home and a buyer’s affordable mortgage and contribution of 70%. The combined effect of fees and repayments effects the APR which is the buyer’s cost of credit.

Example

After six years of ownership, if the buyer decides to sell and house prices have grown for example by 5% every year, the buyer will have to repay £80,406 on their equity loan. The owner will have also paid £1,050 in fees on the HomeBuy Direct equity loan and is assumed to have paid £2,000 in legal and valuation fees. This means the total amount payable after five years on the HomeBuy Direct original assistance of £60,000 is £83,456. For this example, this is equal to an APR 5.7% typical.

The total amount repaid is £83,456. You should remember this is an illustration. House inflation, the Retail Price Index and the fees and costs an owner pays could all vary substantially over time.

Your solicitor/conveyancer will be able to provide a further illustration of APR when they advise you on your purchase. Prospective buyers should always seek independent financial
advice before proceeding.

Alteration, extensions and maintenance to your home

It is your responsibility to repair and maintain your home. New homes often come with a guarantee that will cover certain defects for up to 10 years after it was built. This guarantee usually only covers defects in the housebuilder’s workmanship.

Extending or altering the property

You cannot do this without permission. HomeBuy Direct is designed to help aspiring buyers into home ownership, you should consider repaying part or all of the Agency’s contribution before making plans for improvements or alterations. This is because the Agency is seeking to help future aspiring buyers and may use the proceeds of these repayments to make more low cost homes available.

Therefore, consent will not usually be granted for significant home improvements. However, the National HomeBuy Agent will review cases of hardship if, for example, property modifications are required for a disability.

When your property is sold in the future, if improvements have been made with the approval of the National HomeBuy Agent, these will be ignored when your property is valued to work out how much should be repaid to the Agency.

Restrictions on properties you can purchase

All HomeBuy Direct homes are on new build developments where the Agency has an agreement with the housebuilder. You can only purchase from these designated schemes.

To ensure that growing families can access homes suitable for their needs, the purchase of a property with one bedroom more than your household’s current need is permitted. This is assessed by your Local HomeBuy Agent as part of the eligibility approval process.

 Find your Local HomeBuy Agent

This scheme is now closed for application, but you can still contact your Local Help to Buy Agent for information on other schemes.