LET THE GOVERNMENT HELP YOU ON TO THE PROPERTY LADDER WITH ‘MY CHOICE’ HOMEBUY
‘MY CHOICE’ is a government funded scheme under the ‘HOMEBUY’ banner designed to help First time buyers on to the property ladder.
In Berks Bucks and Oxon the scheme is administered on behalf of the Government by CATALYST HOUSING GROUP a registered social landlord based in Ealing, West London.
It does not matter whether you currently reside in Berks Bucks or Oxon or whether these are the counties in which you wish to buy, either way CATALYST will be able to help you or refer you to the relevant HomeBuy agent.
The scheme is aimed at all first time buyers on a family income of between £20,000 and £60,000.
The scheme enables you to buy the property of your choice from the open market either new or second hand subject to some basic criteria which will be discussed below.
MY CHOICE – YOUR HOME. YOUR CHOICE. YOUR MOVE!
The scheme involves the Government via Catalyst providing an equity loan of between 15% and 50% of the purchase price.)
Catalyst in most cases generally aim to finance about 35 % of the property value with Government funding, leaving you to arrange a mortgage of 65% of the purchase price through a normal Building Society or mortgage provider.
You will though, be required to deal with an Independent Financial Advisor approved by Catalyst who will have been supplied the software to prepare an ‘Affordability Calculator’.
The Affordability Calculator will determine how much you can borrow on the scheme, how much you can borrow from the mortgage provider or Building Society and what the overall repayments will be. Repayments will of course be much lower than funding all of the property purchase through a Building Society or mortgage provider.
The Government contribution via Catalyst is a LOW COST ‘Equity Loan’ which means that when you come to repay it on the eventual sale of the property you will repay the same proportion of the value of the property as you purchased |
By way of example;
If you were to buy a property for £150,000 on the basis of a 35% equity loan from the government via Catalyst your Catalyst loan would be £52,500 and your traditional mortgage would be £97,500. (£52,500+£97,500=£150,000)
If, by the time you come to sell the property prices have doubled and you sell for £300,000, you will repay £105,000 (35% of the sale price) to Catalyst but your mortgage will remain at £97,500 (less any capital value of the repayments you have made) so the growth in value will leave you with a gain of at least £97,500 to put towards your next purchase.(£105,000+£97,500+£97,500=£300,000).
Similarly if house prices reduced you would still only owe Catalyst 35% of the sale price of the property while the debt to the mortgage provider would remain at the same amount as you originally borrowed less any capital value of the repayments you have made. |
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Unlike mortgages (other than ‘Interest Only’ mortgages) the Catalyst loan does not amortise, you merely service the interest on a monthly basis. The Catalyst loan becomes re-payable on the sale of the property or at the end of 25 years whichever comes sooner.
The interest rate on the Catalyst loan starts in the first year at 1.75% and increases each year by RPI (Retail Price Index) +1%.
Recent Affordability calculators suggest at current RPI, that year two rates will be 1.84%, year three rate 1.94% and so on with a view that year fifteen rates could be in the region of 3.46%. Of course neither RPI nor these figures can be guaranteed and are here for rough guidance only.
Should you want to repay your Catalyst loan before you sell your home you can repay 10% of the loan back annually after the first year.
As the rate of interest you will be paying to the Building Society or mortgage provider is likely to be at a much higher rate than the Catalyst loan, repayments of the Building Society/mortgage provider loan will have much more positivet impact on monthly costs than repaying the catalyst loan.
There are limitations on the overall amount of money you can borrow from the Government via Catalyst and from the Building Society/mortgage lender;
Firstly Catalyst have set a maximum for the Government loan at £90,000 unless there are seriously exceptional circumstances where there may be a little discretion.
Secondly Catalyst do not want to see first time buyers over committed financially and so will limit the Building Society/mortgage provider lending to 3.5 to 4 times annual income for single first time buyers or 3 to 3.5 time income for joint incomes.
There are also limitations on the type of property you can buy under the scheme;
The spirit of the scheme is to help first time buyers into the property ladder and as such Catalyst need to be seen to be acting responsibly with the Governments money. Catalyst will be looking for first time buyers to select properties which are typical of the area and well priced.
Gated developments or luxury flats for example would not be considered suitable. Developers incentive packages such as payment of fees, gifted deposits, carpets etc would not be accepted on the scheme as Catalyst have a responsibility to the Government to ensure their money is spent on good value housing and not fees or trimmings.
First time buyers are able to purchase properties with one more bedroom than they need so a single person or a couple could buy a property with up to 2 bedrooms, a family with one child up to three bedrooms and with two children up to 4 bedrooms. If you have more than two children the age and sex of the children will be taken into account in agreeing the most suitable form of accommodation.
Further, there are price bracket limitations on the purchase price of qualifying properties such that a one bedroom property may not exceed £180,000, a two bedroom £230,000, a three bedroom £250,000 and a four bedroom £250,000.
There are other commonsense limitations on the scheme – you cannot buy at auction, you cannot buy commercial property and you cannot buy property in which you already have an interest.
‘MY CHOICE’ - MAKING HOME OWNERSHIP A REALITY
Other than the need to be a first time buyer with a household income of between £20,000 and £60,000 you will need to meet a number of additional qualifying criteria;
Firstly you must be credit worthy, a poor credit history would present problems not only with Catalyst but with the Building Society or mortgage provider. You will need to have a solid employment or income source. If you are self employed you will need to have at least one years trading history for Catalyst but probably more for the Building Society/mortgage provider.
Secondly and as discussed above, the Government will not pay towards anything but the property itself so you will be required to have savings (or access to money from friends or relatives) of at least £3,500 to cover the cost of moving.
In any event you must declare all savings in excess of £5,000 and a portion of such savings will be required to go towards the property you are buying under the scheme.
If you are interested in learning more about this excellent initiative please make an appointment to come in a see Jamie Flatman who will be able to deal with any concerns or queries you may have and in conjunction with Catalyst and the Government help you on the way to home ownership.
Useful official links to find out more about ‘MyChoice HomeBuy’ |
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Terms and conditions apply. MyChoice HomeBuy is subject to an eligibility criteria as prescribed by the Housing Corporation. Formal registration with the Home Buy division of Catalyst Housing Group is required to allow processing to occur.
