Conveyancing in London and the United Kingdom has started to feel the housing market crunch but The First Time Buyers’ Initiative (FTBI) was introduced to make more affordable homes available to first-time buyers. It is available throughout England from 23 regional HomeBuy agents. So what does this mean for first time home buyers?
Who can buy FTBI homes?
50% of the new homes available through the initiative will be for key workers (nurses, teachers, police officers).
The other 50% will be available to first time buyers who fit the following criteria:
The buyers must be first time buyers. They cannot be homeowners already nor can they be named on a mortgage.
The buyers must be unable to afford to buy a home (within reasonable travelling distance of their workplace) which is suitable for their needs.
The buyers must be able to show that they have sufficient funds to pay a deposit (up to 5% of the purchase price), legal fees, stamp duty land tax and the additional costs associated with moving house.
The buyers must be on a long-term employment contract. If they are self-employed, accounts for the past three years will need to be produced and subsequently approved.
The buyers must have a good credit history.
The buyers must take out a first mortgage with one of the qualifying lenders.
What contribution will be given and how is it repaid?
The government will provide up to 50% of the purchase price. Therefore, the mortgage and the cash funds available to the buyer must be at least 50% of the purchase price. Not all buyers will qualify for 50% assistance, the HomeBuy agent will determine the level of contribution available to each buyer.
The government's contribution will need to be repaid on the sale of the property. The repayment will be at the same percentage of the sale price as the contribution, so if the sale price is higher than the purchase price, the repayment to the government is higher (in terms of a monetary figure) than the input.
After three years the buyer will need to pay a fee to the government on sale of the property: 1% of the contribution after three years, 2% after four years and 3% thereafter.
What is the procedure?
The prospective buyers need to register their interest with the HomeBuy agent and they need to complete a HomeBuy application.
If eligible, the buyers will receive an “Approval of Eligibility Letter" from the HomeBuy agent and they will be provided with FTBI schemes in the buyer's area.
The buyers then chose a home and instruct their solicitors and their IFAs to progress a full mortgage application.
Once the HomeBuy agent gives final authority to proceed, the buyer can agree to exchange contracts.
The buyers’ solicitors then need to ensure that all conditions for buying a FTBI home are met (i.e. mortgage offer is in order, property price is agreed and funds are available) and proceed with the purchase of the property as usual.
On completion, the buyers’ lender will provide the drawdown and the government will provide the balance funds. There will be a second charge put on the property for the benefit of the government.
If the buyers want to sell the property later, this can be done on the open market.
A list of FTBI HomeBuy agents is available from the English Partnerships website englishpartnerships.co.uk.
This article is free to republish provided the authors resource box below remains intact.
Robert Johnson is part of Healys who specialise as London Coveyancing Solicitor and also aids the Brighton Conveyancing Solicitor office.
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