What is Homebuy?

Homebuy is a Welsh housing scheme where the government provides an equity loan (like with Help to Buy) to help you purchase an existing property without a deposit.

The scheme is intended for those who can’t afford to buy property without assistance, those who would otherwise 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% - 50% of the purchase price.

Then you’ll need to fund the remaining 70% - 50% using a mortgage and/or savings.

The equity loan

Local Authorities allocate money to Housing Associations, who provide equity loans.

While these loans are free of interest, you’ll still need to pay them back at a later date.

As with other ‘equity loans’ you’ll have to pay back a bigger sum if house prices go up - which tends to happen in the long run - or a smaller amount if they 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.

As the Housing Association needs to determine how much its ‘share’ of the property is worth, 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?

  • People who can’t afford to buy a property ‘suited to their needs’ without any help, including individuals and families.

  • Those who aren’t adequately housed or can no longer occupy their current home.

  • Applicants can’t be in rent arrears or in breach of a tenancy agreement with a Housing Association or Local Authority.

  • Applicants must not have received housing benefit in the past 12 months

  • While people can buy jointly with up to three others, this is only if the joint incomes and savings don’t enable them to buy a home without assistance.

Housing Association rules

Some Housing Associations may make the scheme available for tenants to buy properties that they already rent, in which case you don’t need to show you’re not adequately housed.

However, associations don’t always have the money available to provide an equity loan. If this is the case, you’ll be placed on a waiting list.

Getting a mortgage with Homebuy

You must be able to obtain a mortgage to cover your contribution and have savings to cover the other costs of buying a home, such as legal costs.

When getting a mortgage, government rules say you need to go via a building society, bank, friendly society, or insurance company.

Other lenders could also be acceptable, but you’ll need to check with your Housing Association.

Properties you can purchase with Homebuy

There are some criteria to adhere to in terms of what type of property you are able to buy with the scheme:

  • The property you’re buying must be in an area designated by your Local Authority.

  • It has to be appropriately priced, as there are limits depending on the Local Authority and your family size/needs.

  • It has to be immediately habitable.

  • And it can’t be for sale without a tenant inside.

  • If it’s a leasehold (flats often are), the lease must have at least 60 years remaining.

  • You can buy homes under construction if the sale price is agreed and an exchange of contracts can be achieved within six months.

Properties you can’t purchase

  • You can’t use the scheme to buy properties discounted by a Housing Association.

  • You can’t buy a home that contains any element of commercial use.

  • Anything owned by a family member, friend, or a business partner is also out of the question.

How do you apply for the Homebuy scheme?

  1. View Local Authorities that participate.

  2. The association will provide you with an application form that you’ll need to return.

  3. The association may then ask you for more information, like evidence of income or savings.

  4. You’ll then be told in writing whether you qualify for the scheme.

Once you’ve been accepted for the scheme...

If you’re given the green light, you can use the scheme to buy a home up to a certain price limit stipulated by the association.

So you’ll first need to find a suitable home to buy.

You’ll then need to apply for a mortgage covering 50% - 70% of the purchase price, depending on the size of the equity loan.

It may also be worth taking out a survey to check there are no hidden defects with the property.

After this is done, you’ll need to go back to the association to get approval to buy the home, then instruct a legal representative to go ahead with the purchase of the property.

The association then transfers the equity loan to your legal representative in preparation for completing the final purchase.

Frequently asked questions (FAQs)

Can I make home improvements?

Yes, but you need to notify the Housing Association and gain approval before making any alterations or improvements, like building an extension.

Bear in mind that making improvements could increase the market value of the property, which would also cause the value of the equity loan to go up.

So it may be worth paying off the equity loan before building an extension.

What happens if the homeowner dies?

If someone buying using the scheme dies and another family member or partner is left, they may take ownership and continue to live in the home.

In this case the mortgage costs would be transferred to them.

Otherwise, the home will be sold to repay the outstanding loan.

What is a Housing Association?

Housing Associations are not-for profit organisations that rent houses and flats to people on low incomes.

What is a Local Authority?

Local authorities provide government services locally. There are 22 in Wales.

Further resources

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Your home could be repossessed if you don't keep up repayments on your mortgage.

You may have to pay an early repayment charge to your existing lender if you remortgage.

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