Open Market Home Buy Scheme

The Open Market HomeBuy scheme is led by the government in partnership with a small group of mortgage lenders. It helps key workers, social tenants, priority groups on a housing register and priority first-time buyers to borrow money to buy a home.

■ The Open Market HomeBuy scheme is just one way for you to raise money to buy a home. You need to decide whether it is right for you.

■ The mortgage lenders offer different Open Market HomeBuy mortgages with different terms and conditions. Make sure you shop around and choose the right deal for you.

■ If you are unsure about the scheme or want to know more about the other types of home loan available, consider getting independent financial advice. Your HomeBuy Agent may be able to give you details of a specialist adviser.

How does the Open Market Home Buy scheme work?

The scheme involves borrowing money from a mortgage lender and a HomeBuy Agent. HomeBuy Agents manage the money that the government puts into the scheme.

If you borrow under the scheme, you will take out three different loans. Each works in a different way, so it’s important that you understand the features of each one. These are:

■ A standard mortgage loan from a mortgage lender.

The mortgage lender will charge interest
and you’ll make monthly payments. This loan
will usually be the largest of the three.

■ An ‘equity loan’ from the same mortgage lender.

This works in a very different way from the lender’s standard mortgage loan. When you pay off this loan the mortgage lender takes a share of any increase in the value of your home. The share it takes is based on the percentage of the property’s value you originally borrow through the equity loan. The example on page 3 shows how this works. The lender won’t charge you interest for the first five years. After this time you will pay interest. The rate you pay will depend on the lender you choose.

■ Another ‘equity loan’ from the HomeBuy Agent.

As with the mortgage lender’s equity loan, the HomeBuy Agent will take a share of any increase in the value of your home when you sell the property or repay the loan. However, the HomeBuy Agent won’t ever charge you interest and there are no monthly payments.

FSA regulates the mortgage lenders involved in the Open Market HomeBuy scheme, which means they have to meet our standards. The mortgage lender has to give you details about the loans in a document called about this mortgage. This will tell you:

■ what you are borrowing;

■ what you’ll be charged; and

■ what your repayments will be.

Use this document to help you compare products from different mortgage lenders to see which is most suitable for your needs. We don’t regulate HomeBuy Agents, so the document won’t include information about their equity loan. Ask your HomeBuy Agent for more information.

Remember:

If you can’t pay back the money you owe, there is a risk you could lose your home, because all three loans are secured against your property. And when you sell your home, the loans must be paid off before you get any of the money from the sale.

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