First: Real Estate and Local Homebuy Agent Essay

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FirstBuy Buyers’ Guide
Homes and Communities Agency July 2011 http://www.homesandcommunities.co.uk/firstbuy

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What is FirstBuy? FirstBuy is an affordable housing deposit assistance equity loan product from the Homes and Communities Agency, working in partnership with house builders. It aims to make more new affordable homes available to eligible buyers priced out of the housing market. FirstBuy is available in England and only from approved, participating house builders for a limited time period – no assistance is available after March 31st 2013. This guide provides an overview of the product. If you’d like to know more, or if you want to apply, please contact your Local HomeBuy Agent (see page 18).

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.

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Overview: the ‘stepping-stone’ into home ownership With FirstBuy, the buyer (‘you’) buys a new home on an approved FirstBuy new build development with assistance from both the Homes and Communities Agency (‘the Agency’) and the house builder in the form of two equity loans. You must take out a first mortgage (with a qualifying lending institution e.g. a bank or building society). This mortgage, together with any cash contribution from you, must be a minimum of 80% of the full purchase price the maximum full purchase price is set at £280,000.) The Agency and the house builder 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 20% 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 house builder as the initial equity loans (i.e. if you received equity loans for 20% of the purchase price of your home, you must repay 20% of the proceeds of the sale). In addition, you can, if you wish, make voluntary part repayments of the equity loans (‘staircasing’). 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 increase (if any) in the Retail Price Index (RPI) plus 1%. If you purchase a home through FirstBuy, 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 FirstBuy, 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.

How does it work? FirstBuy enables eligible buyers to purchase a new property, funded by an affordable mortgage and with help from the Agency and the participating house builder. This enables you to take out an affordable mortgage on which you make repayments in the normal way in conjunction with a deposit that the mortgage lender may require (to cover a combined minimum 80% of the total purchase price). The rest of the purchase price will be paid for with equity loans from the Agency and the house builder.

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As a result of providing this assistance, the Agency and house builder 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…