Homebuy scheme (Wales): what is it and how does it work?
Find out what you need to know about the Welsh housing scheme with this guide.
Your home may be repossessed if you do not keep up repayments on your mortgage.
What is Homebuy?
Homebuy is a Welsh housing scheme where the government provides an equity loan. It helps you buy a property without a deposit.
The scheme is for people who cannot afford to buy a property without help and would need social housing. As well as people in rural communities.
How does the Homebuy scheme work?
You’ll take out an interest-free loan on between 30% to 50% of the purchase price.
You’ll then need to fund the other 70% to 50% using a mortgage and/or savings.
The equity loan
Local authorities give money to housing associations, who provide equity loans.
These loans are free of interest but you’ll still need to pay them back at a later date.
Like other ‘equity loans’ you’ll have to pay back a bigger sum if house prices go up. This tends to happen in the long run. You'll pay a smaller amount if house prices go down.
Repaying a Homebuy loan
You’ll need to repay the government loan when you sell your home. Or before if you have the money and decide that’s what you want to do.
The housing association needs to work out how much its ‘share’ of the property is worth. This is why you’ll need to ask them to carry out an independent valuation of the home.
You’ll have to pay a valuation fee for this service.
Who’s eligible for the Homebuy scheme?
You can apply for the Homebuy scheme if you:
cannot afford to buy a property that suits your needs’ without help. This includes help from friends and family
do not have suitable housing or can no longer live in your current home
have not had any housing benefit in the past 12 months
You cannot apply if you owe rent. Or if you've broken a tenancy agreement with a housing association or local authority.
You can buy jointly with up to 3 others. This is only if the joint income and savings are not enough to be able to buy a home without help.
Housing association rules
Some housing associations may let you buy a property that you already rent using the scheme. In this case, you do not need to show you’re not living in a suitable home.
Associations do not always have the money available to offer an equity loan. In this case, they'll put you on a waiting list.
Getting a mortgage with Homebuy
You must be able to get a mortgage to cover your contribution. As well as have savings to cover the other costs of buying a home such as legal costs.
Government rules say you must get a mortgage from a building society, bank, friendly society or insurance company.
They may accept other lenders but you’ll need to check with your housing association.
Properties you can buy with Homebuy
The property you buy using the scheme must:
be in an area designated by your local authority
be an appropriate price. There are limits depending on the local authority and your family size and needs
be suitable to live in straight away
not be for sale without a tenant inside
have at least 60 years on the lease left if it's a leasehold (flats often are)
have an agreed sale price if the property is under construction. You must also have exchanged contracts within 6 months
Properties you cannot buy
You cannot use the scheme to buy a property that is:
discounted by a housing association
used for commercial use in any way
owned by a family member, friend, or a business partner
How do you apply for the Homebuy scheme?
Get an application form from the association, complete and return it
Send any information the association may ask you for. This could be evidence of income or savings
You’ll get written notice saying you qualify for the scheme
Once you’ve been accepted for the scheme
If you’re accepted, you can use the scheme to buy a home up to a certain price that is set by the association.
Once you're accepted for the scheme:
find a suitable home to buy
apply for a mortgage covering 50% to 70% of the purchase price, depending on the size of the equity loan
think about taking out a survey to check there are no hidden issues with the property
go back to the association to get approval to buy the home
ask a legal representative to go ahead with the purchase of the property
the association will transfer the equity loan to your legal representative. They'll then prepare for completing the purchase
More about the Homebuy scheme
You must tell the housing association and get approval before you make home improvements.
Remember that making improvements could increase the market value of the property. This means the value of the equity loan will go up.
It may be worth paying off the equity loan before making improvements like building an extension.
If someone buying using the scheme dies, another family member or partner can take ownership and continue to live there.
In this case the mortgage costs would be transferred to them.
Otherwise, the home will be sold to repay the rest of the loan.
Housing associations are not-for-profit organisations. They rent houses and flats to people on low incomes.
Local authorities provide government services locally. There are 22 in Wales.
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You may have to pay an early repayment charge to your existing lender if you remortgage. Your savings will depend on personal circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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