HomeBuy Direct
This content applies to England only.
Housing laws vary between England and Scotland. Get advice relating to Scotland
HomeBuy Direct is an equity loan scheme designed to help people buy certain new-build properties.
Who is eligible?
The scheme is aimed at people with a household income of £60,000 per year or less. It is currently open to people who are:
- first time buyers or
- council/housing association tenants.
You can be considered if you have never owned a home before, or if you used to own a home but don’t anymore.
What homes are included?
Newly built flats and houses in certain developments across England.
How does it work?
Like buying on the open market, you buy and own the whole of the property. The difference is that the purchase is funded in part by you, through a combination of a mortgage and savings, and in part by an equity loan. The equity loan can fund up to 30 per cent of the property value, and is provided jointly by the Government and the house builder.
There are no charges for the equity loan for the first five years, but after this you will be charged a fee each month. The fees do not reduce the amount of the loan.
You can increase your equity in the property at any time, by repaying the equity loan (usually in instalments).
When you sell the property, you have to repay the equity loan. The amount repaid will vary according to the value of your home, as the value of the loan changes according to how much your home is worth. If the loan was for 30 per cent of the purchase price of the property (and haven’t increased your share of the equity), you will repay 30 per cent of the price when you sell.
Most properties under this scheme will be leasehold, but if you buy under the scheme, when you increase your share to 100 per cent, you will gain the freehold.
What if I want to sell?
You are free to sell the property on the open market whenever you are ready. When you sell, you will have to repay the mortgage and the equity loan (and any other loans secured against the property).
The amount of the equity loan which you need to repay will depend on the sale price of the property and the proportion of the home still funded by the equity loan. For example, if the equity loan was originally for 30 per cent of the property, and you repaid 5 per cent of the property value, you will have to pay 25 per cent of the sale price when you sell.
Want to know more?
For more information, see our page about home ownership schemes. To find out more about the schemes, properties available in your area or to apply, contact your local HomeBuy agent, or First Steps agent if you live in London.
You can find out more equity loans and charges/fees from Direct.gov.
Where can I get advice?
It is important to get independent financial advice before you decide to go ahead with any property purchase. An adviser could help you work out the best option for you and what you can realistically afford. Independent financial advisors should be registered with the Financial Services Authority. They usually charge for their services.
Alternatively, your local advice centre may be able to help you. Use our directory to find one.
