Help to Buy Equity Loan

Transcription

1 Tel: Help to Buy Equity Loan A guide to buying your home What does Help to Buy NEYH do? 2 Who does Help to Buy NEYH, help to buy? 3 Authority to Proceed 4 The Application 5 Mortgage Offer and Exchange of Contracts 6 Completing the Purchase 7 How Long Does It Take? 8 Mortgage Lowdown 9 FAQ s 10

2 What does Help to Buy NEYH do? So if you are thinking about using Help to Buy to purchase your dream home you must be wondering what happens now? Here is an insight in to who we are and what we do for you. We are your local Help to Buy agent, and we act on behalf of the Homes and Communities Agency, also known as the HCA, to filter potential buyers, such as you, towards the Help to Buy scheme in the North East, Yorkshire and Humberside. We carry out an affordability check on all applicants to make sure that you are suitable for the scheme before we go forward with the application process. Our role as your Local Help to Buy Agent is to: Provide information about Help to Buy schemes to prospective buyers Assess your affordability and eligibility Give approval to your solicitor/conveyancer to proceed with your purchase Once you have completed your application for Help to Buy and your application has been approved and the sale is complete, all your details will be transferred to the post sale agent. The role for the post sale agent team is to: Collect the 1 management fee from the beginning of the loan. Administer payment of the interest fees from buyers on the Help to Buy Equity Loan after five years. Recover the equity loan repayment as owners sell and move on or pay off their Equity Loan. Provide advice and approval for exceptional cases relating to subletting, re-mortgaging and requests for additional borrowing. 2

3 Who does Help to Buy NEYH, help to buy? The myth that surrounds the Help to Buy scheme is that it is only for first time buyers and it is safe to say that this is definitely not the case. The scheme we offer is for any buyer who is looking to purchase a new build home. Whether you re looking to get on the property ladder or move up it, we re here to provide you with the assistance you need. Obviously, there is certain criterion you must meet in order to qualify for Help to Buy. For us to be able to help you, you must be able to: Fund up to 75% of your chosen property through a conventional mortgage Have access to a minimum 5% deposit Take out a mortgage with a qualifying lender You must also: Have no other residence or properties in your name Have sold any properties in your name before the completion date Not rent out your existing home and buy a second home through Help to Buy We will then carry out an assessment of your application to make sure that you are in a position to afford a mortgage for your proposed purchase. If you make a fraudulent claim for Help to Buy assistance, you will be liable to criminal prosecution and any fraudulent claims will always require immediate repayment of the Help to Buy equity loan. First time buyers Second steppers Families Martha and Chris were finally able to break the renting cycle when a new homes development was opened in the town. A young couple from Harrogate were finally able to break the renting cycle when a new homes development was opened in the town. We had been looking at homes to purchase after our landlord informed us he was selling the flat we currently lived in but found that there were very few new homes being built in the area that were within our price bracket Help to Buy is a fantastic scheme which meant we could afford a lovely new home much more comfortably than we could have imagined and in a lovely part of town. It s allowed us to break the renting cycle, buy a home in an ideal location for work and family commitments and we are sure it will be the perfect place to start our married life together. 3

4 The Application It is important you know what happens throughout the entire Help to Buy process in order to overcome any issues and make sure you have a smooth journey from the point of application to receiving your keys for your new home. Stage one is the application. You will need to contact house builders, visit schemes of registered house builders and identify the property you wish to buy. We recommend you see an Independent Financial Adviser (IFA) to gain confirmation of your financial status. We have a list of IFAs on our website that you can download if you go to co.uk/helpful-info/financial-advisers/. You must ensure you have the funds to pay: A reservation fee if required. This is basically a deposit, similar to what you would put down when you are renting a property. A deposit on exchange of contracts of at least 5% of the full purchase price. You should be aware that some of the main mortgage lenders may require higher deposits. Other fees on completion, such as stamp duty and legal fees. You must then reserve your chosen home and pay a reservation fee if your house builder requires one. You then need to complete a Help to Buy Property Information Form (PIF) which is available from the developer or on our website to complete online. You must complete this with details of your proposed purchase, your proposed main mortgage, deposit and you must include your household income. Included in the PIF will be a direct debit form, which you need to fill in to pay a monthly 1 management fee to the post sales agent. Louise Highton, 26, bought her three-bed home in York, just a year after finishing university, with the low deposit enabling her to take her first steps on the property ladder. I finished my PHD at the University of York last year and got a job straight after. I thought that as I m going to be here permanently, it makes sense to look at buying a house rather than renting. We were a little dubious at first and had to work out whether it made sense in the long run, however even 80% of this home is more than we could of afforded if we hadn t used the scheme. The whole process was really simple. They put us in touch with a mortgage adviser and he did almost everything for us. We had a meeting with him, gave him all the relevant documents and paperwork and he sorted it all out for us. I d definitely recommend Help to Buy to people in a similar position. You can get a much bigger house for your money with such a small deposit! The PIF will also confirm your agreement to the funds being paid directly to the house builder to enable them to reduce the full purchase price of the property. The signed PIF and a copy of the builder s signed reservation form must then be sent to us, your local Help to Buy agent. 4

5 Authority to Proceed Once the initial application has been sent to us, the next step is the Authority to Proceed (ATP). After we receive the Property Information Form (PIF) we will check that you are able to afford your main mortgage and make sure you have signed the declaration that states the Help to Buy property you want to purchase is your only residence. If you fit the eligibility criteria for Help to Buy, you will receive an Authority to Proceed (ATP) from us within four working days of us receiving your PIF and reservation form. This process may be delayed if you do not fully complete your PIF. Before we can issue the ATP you will need to instruct your solicitor so their details can be included on the form The ATP will be accompanied by instructions to you and your solicitor/ conveyancer. The pack will include legal documents that will be explained to you by your solicitor/conveyancer. Once you have recieved your ATP, you (or your IFA) will be able to make a full mortgage application. Solicitor Q&A with Richard Wisnia What do I need to know when appointing a solicitor? Expertise is the key. Make sure that the solicitor you re appointing has experience in the field. Ask if they have done any Help to Buy cases. What fees will I have to pay during the process? You will have to pay a legal fee, which is the cost of the work your solicitor carries out for you. Also payable are disbursements. These are things such as search reports, a land registration fee so that Land Registry can register your home upon completion and stamp duty. Be aware of all the costs before you begin. You can give us a call on at any stage of your application to get an update on where it s at. 5

6 Mortgage Offer and Exchange of Contracts After we have received your application and we have issued the Authority to Proceed (ATP) the next step will be the mortgage offer and the exchange of contracts. Your solicitor/conveyancer will: Advise you and ensure that you sign the sale contract and the Help to Buy equity loan Explain the legal implications of the equity loan and how your new Help to Buy home must be your only residence and what the consequences of a fraudulent application will be Check that your mortgage offer, property price and your available funds are consistent with the ATP and requests permission to exchange contracts from us We will then issue approval to your solicitor/ conveyancer and contracts are then exchanged. You will have paid a deposit if required and you will be legally contracted to complete the purchase by an agreed date. Keep in mind that if you can afford more than 90% of the full purchase price of your intended Help to Buy property then you will not qualify for Help to Buy assistance. Johnny and Jennifer completed the purchase of their home at Daisy Hill in Morley, having previously lived in a small two-bed terrace. Although we were interested before we heard of Help to Buy, we didn t get a lot of money for our previous home so knew it would be a close call on whether we could afford a house on the site. After selling our home we heard about Help to Buy and with help of the scheme we could afford one of the three bed homes on the development. With Help to Buy we were able to secure a much bigger house for our money whilst the mortgage payments are similar to what we were paying before. We ve always liked new build homes. The fact that you can move into one of the homes straight away without a lot of work is fantastic and in the long run it saves you money as well. Check out our YouTube channel to watch a Q&A with solicitor Richard Wisnia on the house buying process. 6

7 Completing the Purchase Now that the process is coming to an end, you are ready to complete the purchase of your new home. At the completion stage, your lender will provide the mortgage funds and the agency will make the equity loan funds available to you via the house builder. Once the completion has taken place, you will then own the property and you can move in to your brand new home. Your solicitor will then return the confirmation of the sale to us and we will then register your details with the post sales agent. A second charge will be registered on your home by your solicitor in favour of the HCA, entitling it to a share of the future sale proceeds. The charge will be equivalent to the percentage contribution made towards the purchase price and you must repay this when you sell your home or after 25 years, whichever is earlier. Start of year Estimated annual charge in property price % Total property value Help to Buy home owner your entitlement to 80% of property value Agency entitlement to 20% of property value , ,000 40, , ,200 40, , ,464 41, , ,794 42, , ,477 43, , ,653 44,163 In the example above, if you decide to sell your home at the start of year 6, after owning the property for 5 years, and assuming the property value has increased by 2% each year, you would receive an estimated 220,816 from the sale of your home. You would then use this to settle any outstanding balance on your main mortgage and repay the 44,163 Help to Buy equity loan. 7

8 How Long Does It Take? Once you have picked your dream home, we know you want to move in straight away. We try to make the process as quick and easy as possible but there are obviously various timings for each part of the process. Once you have reserved the property and submitted a completed Property Information Form (PIF) to us, we will seek to assess your affordability, which we do by looking at your fully completed PIF, within four working days and we will then issue an Authority to Proceed (ATP). Our ATP is valid for three months, which is the time limit for exchange of contracts. Typically most house builders will be looking for buyers to exchange contracts within one month of making a reservation. You are responsible for securing your mortgage and appointing your solicitor/conveyance although we will be able to suggest some options for you to contact. So to summarise: It will take up to four days for us to issue an Authority to Proceed The Authority to Proceed is valid for three months The majority of house builders aim to exchange contracts within one month of you making a reservation The sale must complete within 6 months of exchanging contracts The process from application to completion must take place within 9 months. Don t have a solicitor or financial adviser? Check out our website for a list you can download. 8

9 Mortgage Lowdown Trying to understand the ins and outs of your mortgage can be stressful. So we re here to take that stress away and tell you all you need to know about getting a mortgage to purchase your Help to Buy home. Your mortgage is based on a multiple up to a maximum of 4.5 times your household income and it is designed so you can make affordable repayments based on your income. In order to receive Help to Buy assistance, you will need a minimum contribution of 80% of the full purchase price of your property which is made up by your 5% deposit and a 75% mortgage. You can however put in a higher deposit. As a Help to Buy purchaser, you are expected to maximise your contribution to a reasonably affordable level and as your Help to Buy agent we will assess the affordability of your mortgage contribution. We always ensure that whilst maximising your mortgage you will still be able to afford your repayments and we work to a guideline to make sure that your monthly costs (such as your mortgage, service charges and fees) are no more than 45% of your net disposable income. After renting their home, Christian and Laura were able to take their first steps on the property ladder thanks to Help to Buy. We started looking last July for a home after having a few problems in the apartment we were renting at the time. We also felt we were wasting our money on rent as we had nothing to show for it. At the end of the day, renting is like dead money because you re not investing anything into your future. The application process was really easy and straightforward. We had to fill out an application form and that was it really, everything else was sorted out for us. You have so much freedom when you own your own home. You know that you are actually investing into something and not throwing your money away on rent. I d absolutely recommend the scheme. It s given us the opportunity to own an amazing home that we didn t think we could have had before. 9

10 FAQ s Who provides the contribution for Help to Buy? The equity loan is provided by the Homes and Communities Agency. The contribution is secured by a second charge on your property title registered at Land Registry. Can I sublet my Help to Buy home? No. Help to Buy is designed to assist you to move on to, or up the housing ladder. If you wish to sublet, you will first have to repay the Help to Buy equity loan. In exceptional circumstances, e.g. a serving member of the Armed Forces, whose role requires them to serve away from the area in which they live for a fixed period, then sub-letting is allowed. In these circumstances you would also require approval from your mortgage lender and post sales agent. Can I own other homes and buy a Help to Buy home? No. Help to Buy is designed to assist you to move up the housing ladder and must be your only residence. This means you will be expected to sell your current home if moving up the ladder. The disposal of your current home will be verified by your solicitor/conveyoncer before you can proceed to exchange contracts on the Help to Buy home. In addition you cannot be linked to a property financially, for the avoidance of doubt, married couples own assets jointly and therefore if one owns a property the other is directly linked to the asset and treated as a home owner also. Can I own a Help to Buy home and buy a second home? No. Help to Buy is designed to assist you to move up the housing ladder. If you can afford to purchase another home you will have to repay the Help to Buy equity loan. Married couples also standardly by law own each others assets, therefore all assets in a single name are treated as jointly owned in this scenario. Can I extend or alter the property? Not without permission. Because Help to Buy is designed to help people move up the housing ladder, 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 assistance available. Therefore, consent will not usually be granted for significant home improvements. The Post Sales Agent will act reasonably in considering any application and will review cases of hardshop 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 Post Sales Agent, these will be ignored when your property is valued to work out how much should be repaid to the Agency. After 5 years of ownership, how is the interest fee collected? Interest fees can be paid in a single yearly payment or in monthly instalments after the 5th year. The Post Sales Agent will collect your fee 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. What is the 1 management fee? The 1 management fee is to cover administration costs over the period of the loan (excluding any administration costs for defaulting borrowers, changes of ownership, consents or repayment costs). This fee is payable by you from the start of the loan until you have repaid it. The fee does not reduce the amount that is owed on the loan. It will be collected by the Post Sales Agent by direct debit each month. 10