The main aim of the Open Market HomeBuy initiative is to assist key workers to purchase a property in the area that they work. However, it will also be available to other priority first time buyers as well.
Whilst all lenders participating in this initiative are united in their support of the scheme, their individual products do have some differences.
The key features of the Advantage product are as follows:
• Advantage will share in the potential increase or decrease in the property value and is the only lender in the programme to share downside risk;
• Advantage’s HomeBuy HOP is the only product that allows a borrower to pay a deposit, for those who have some savings that they wish to invest in to the property, without affecting the government equity loan;
• Advantage’s HomeBuy HOP is portable, so key workers and others who need to move home have the option to move their mortgage with them;
• Advantage’s HomeBuy HOP allows further advances for standard purposes; and
• There is a provision for overpayments and buyback options with the Advantage product allowing borrowers to buy back the Residential Ownership Loan or pay down the conventional mortgage and to realise increased borrower equity in stages.
Individuals initially need to be approved by a HomeBuy Agent in order to obtain a government equity loan of between 10 per cent and 12.5 per cent of the property price. The government equity loan is interest free for the term of the mortgage.
The Advantage HomeBuy Home Ownership Plan is a single mortgage made up of three parts:
Part 1 – Advantage Conventional Mortgage – a two-year stepped fixed rate of 5.59 per cent (year 1) and 6.59 per cent (year 2) that reverts to LIBOR plus 2.50 per cent after two years, of between 12.6-77.5 per cent of the property price
Part 2 – Advantage Residential Ownership Loan (ROL) – 0 per cent for five years then reverts to 2.89 per cent for the remainder of the term. The ROL is fixed at 12.5 per cent of the property price.
Part 3 - Advantage takes a share in any increase in property value in the same proportion as the ROL, yet also shares in any decrease in the property value from the original purchase price by reducing the ROL in proportion to the fall in value.
Mark Clarke, chief executive officer (CEO) of Advantage, said: “We are delighted to participate in the government’s Open Market HomeBuy initiative. The launch of Flexishare and now the government HomeBuy HOP is a clear example of how Advantage is working to provide innovative and practical solutions to those finding it difficult to become homeowners.”
