In March 2011, Chancellor George Osborne announced the introduction of FirstBuy, an initiative designed to help first time buyers onto the property ladder in the form of a shared equity scheme on certain new-build property developments in the UK. The scheme is similar to the HomeBuy Direct scheme set up by the previous Government and launched in September 2008, on which funding has now ceased.
FirstBuy is open to first time buyers with an annual household income of less than £60,000 (a proposed £74,000 for households in London for those buying a house with three or more bedrooms) who are unable to otherwise afford to purchase a suitable property on the open market without assistance, who have saved a deposit of 5% of the property price.
The local HomeBuy Agent will check the eligibility of the applicant and calculate how much the applicant is deemed to be able to comfortably afford to pay, based on housing costs accounting for no more than 45% of net available income.
Those eligible then qualify for an equity loan of 20% of the property value, jointly funded by the housebuilder and the Government. The buyer then has to find a mortgage for the balance of 75 per cent of the property price.
The loan is based on the percentage of the value of the property, rather than an absolute sum of money. It is interest-free for five years, with interest charged at 1.75% in the sixth year and increasing at 1% above the RPI rate of inflation thereafter. The loan is repayable when the property is sold, or after 25 years, whichever is sooner.
it's important to remember that the loan is based on the proportion of the property value, not an absolute sum of money. Therefore when the time comes to repay the loan, it will be 20% of your property's value at that time rather than what it was when you took out the loan.
Click on these links to find out the regional allocations of FirstBuy funds to housebuilders and housing associations in England, as announced on 20th June 2011: