The UK property market is bustling and housing provider heylo is keen to tell house-hunters on a modest budget that they able to do some serious house-hunting thanks to its Home Reach homebuyer initiative.
Home Reach is a ‘part buy-part rent’ scheme which heylo runs in partnership with a host of major housebuilders across England and Wales. It allows people to purchase a share of a brand new home, from25% to 75%, and pay a subsidised rent on the rest, so they can have a place of their own with a much smaller budget and mortgage then they would need to buy outright.
Your budget effects the size of the share you buy, rather than the size of the home, meaning you might decide to buy a bigger share of a lower-priced home, or a smaller share of a more expensive home.
But what qualifies someone to use this special scheme?
Income
First off, you must be over 18-years-old and your household income cannot exceed £80,000. An exception is Greater London, where the limit is £90,000 in Greater London to take into consideration the higher cost of living and average house prices in the capital’s property market.
Partridge Walk from Bovis Homes
Inclusivity
Secondly, you must be either a ‘verified’ first-time buyer, or if you used to own a home but don’t anymore. In the case of the latter, you must be in the position that you can’t currently afford to buy outright again. You don’t qualify for Home Reach is you own a non-residential property that provides your main income.
Many divorcees use Home Reach, having once jointly owned a property but now unable to afford to buy outright on their own.
Part buy-part rent properties also prove especially popular with Armed Forces personnel. With the Forces Help to Buy scheme, servicemen and servicewomen can apply to borrow up to 50% of their salary (up to a maximum of £25,000) to help buy their first home.
Only military personnel are given priority over other buyers in government-funded Shared Ownership schemes. Different rules may apply to programmes run by individual councils, with priority groups established and based on local housing needs, which can include at-risk individuals and disabled people.
Buyers receiving benefits are eligible for Shared Ownership provided they meet the Homes England affordability assessment (see below).
Financial assessment
An independent financial advisor (IFA) or independent mortgage advisor (IMA) will verify your capacity to pay the monthly costs you’ll need to maintain residence in your property.
To determine the share of a Home Reach property you can afford, the IFA or IMA will help you use Homes England’s eligibility and affordability assessment calculator, which takes into account your financial income and outgoings in order to determine what you can afford. Once this is completed, the advisor will inform you of the share you are able to buy, including the level of deposit you can afford. They will also determine what will qualify as sustainable monthly rent payments for your budget, ensuring you can keep up with monthly repayments today and for the foreseeable future.
Buyers must purchase the maximum share they can reasonably afford within the parameters of the Homes England calculator.
All buyers must demonstrate a good credit history (see below for the requirements) and be able to afford the regular payments and costs involved in buying a home.
You must have a minimum 5% deposit towards the share you are purchasing and retain a portion of their savings to cover the costs of purchase and moving home which can typically up to £5,000). This may include mortgage application fees, legal fees, valuation fees, moving costs and Stamp Duty Land Tax where applicable.
If you’re self-employed, you must provide two years of accounts.
Willowherb @ Victoria Mews from Barratt Homes
Registration and approval
You must be registered with a Help to Buy agent, which can be found in your local area, and go through a brief assessment that should take no longer than 20 minutes.
Once you are approved with a Help to Buy agent, you will be sent a letter of acceptance and your registration number. It’s imperative that you hold on to these documents and have them to hand when applying for your Home Reach property.
Sole property
The property you are buying will be your principal and only home.
Buying in cash
If you want to purchase your share in cash, you’ll still need to meet the eligibility criteria for Shared Ownership, and the cash and assets which are contributing towards the purchase must NOT be sufficient to buy the property outright.
There will be appropriate money laundering checks on the source of the cash being used. The most common valid sources are an inheritance, a cash sum from a pension or the result of a relationship breakdown where the customer is being bought out of their existing property.
Customers must be able to provide evidence that they are legitimately prevented from raising a mortgage. Evidence for this must be in the form of their credit rating, a letter from a lender or a decision in principle (DIP), also known as an agreement in principle (AIP) or mortgage promise.
Home Reach will pay attention to affordability and sustainability calculations for cash buyers, particularly to check that that the rent, service charge, and any other housing costs do not breach 45% of the customers’ net household income (after debts).
Grovewood Apartments
Credit check
To use Home Reach, you will be subject to a ‘soft’ credit search once you have sent in your reservation form, and there are some minimum credit history requirements for applicants:
- No IVA (individual voluntary agreement), debt relief order (DRO), bankruptcy or mortgage repossession in the previous six years
- No unsatisfied loan default in the previous six years
- Satisfied county court judgements (CCJs and defaults must total less than £1,000 in cumulative value
- No loan greater than £1,000 with a balance longer than three months in arrears at any time in the previous 36 months
Where the above are satisfied but the purchaser has a history of missed payments, Home Reach will use a credit score and may decline low-scoring purchasers.
Where there are multiple purchasers, some who meet the credit history requirements and some with unacceptable credit history, if the total monthly costs of the proposed purchase are less than 40% of the net monthly income of the applicants with acceptable credit, the application will be acceptable.
Exceptions to these credit standards may be made on individual review in exceptional circumstances, where severe life events beyond their control have impacted upon a purchaser’s credit history.
Find out more about all aspects of Home Reach.
Take a look at current homes available on the Home Reach scheme.