5  Post Sales Procedures

5.1 General

5.1.1 The following events require the Equity Loan Provider's consent under the terms of the equity loan agreement that secures the equity loan:

• re-mortgaging;
• where the owner wishes to secure additional borrowing;
• undertaking works.

5.1.2 The Equity Loan Provider must not unreasonably withhold  their consent , although they can do so, if it is reasonable.

5.1.3 The owner’s opportunity to undertake all or any of these activities will also depend on the terms and conditions of the mortgage provided by their conventional mortgage lender. 

5.1.4 For each of the above events the Equity Loan Provider must ensure that its equity loan remains secured against the property.

5.1.5  It is likely that home owners might require changes to their conventional mortgage arrangements whilst occupying the OMHB property.  The procedures below deal with these circumstances.

5.2 Re-mortgaging

5.2.1 The home owner may want to remortgage with another lender. For example to benefit from a more preferential lending rate or to extend the period of the original mortgage agreement.The Equity Loan Provider's consent is needed if their equity loan is still in place - see also para 5.2.4 below.

For additional guidance on remortgaging please click on the asterisk.  

 

5.2.2 If the home owner has not repaid the Equity Loan Provider's equity loan, the alternative lender must be a Qualifying Lending Institution (DN - build in a link)

5.2.3 Any new lender will need a new deed of postponement from the Equity Loan Provider. Equity Loan Providers should make borrowers aware that they are may incur significant early repayment charges if they redeem their mortgage loan and to check their mortgage agreement for details.. 

5.2.4 Home owners with the Ownhome equity loan provided by Places for People will not be able to re-mortgage with an alternative provider during the term of their initial mortgage product Conditions may vary depending upon which mortgage product option was originally selected and home owners should contact the mortgage lender accordingly.

5.3 Additional Borrowing & Works to the Property

5.3.1 Total borrowings must not normally exceed a loan to value ratio equal to the same percentage as the equity loan, nor be provided by a non-Qualifying Lending Institution in order to be treated as a first charge. For an example please click on the asterisk.  

 

If either of the above criteria are not met, the additional loan  must not be registered as a priority charge over the Equity Loan Provider's equity loan.

 

5.3.2 The agreement of the Equity Loan Provider and conventional mortgage lender must be obtained before the owner undertakes any works. Click on the asterisk for more guidance  

 

5.3.3 However, if essential repairs are required to the property, the Equity Loan Provider has discretion to agree further secured borrowing (from a Qualifying Lending Institution ) above this limit where it is satisfied that the repairs are urgently required to protect all parties’ interest in the property. Follow asterisk for further guidance  

 

5.4 Mortgage Loan Default

5.4.1 In the event of a property being repossessed by the conventional mortgage lender (which has a first charge on the property), it will have first call on the sales receipt to repay any outstanding mortgage loan debt.  Any remaining sale proceeds will be subject to the trems of the Equity Loan Agreement to repay the equity loan. Equity Loan Providers will be required to provide equity loan applicants and home owners with an explanation as to how these work and whether any remaining balance may be due to the home owner.

5.4.2 If as a result of a default of the mortgage by the home owner and the Equity Loan Provider proposes  to:

• end the equity loan;
• demand early payment of any sum;
• obtain possession of the property (subject to any prior rights of the mortgage lender);
• treat any rights conferred on the individual by the equity loan as terminated, restricted or deferred; or
• enforce any security

the Equity Loan Provider must do so in accordance with the terms of the Equity Loan Agreement. 

5.4.3 Equity Loan Repayments

Mandatory Repayments

A home owner is required to repay the equity loan in full in the following circumstances:

• when the property is sold
• at the 25th anniversary of the equity loan
• the expiry of a default notice
• should the home owner become insolvent
• when the home owner is no longer resident in the property (in joint applications this would be when the last of the original applicants was no longer resident)
• if the first charge is redeemed with no replacement senior lender

Home owners should enquire of their Equity Loan Provider for full details of the above circumstances.

Voluntary Repayments

A home owner can voluntarily repay the equity loan, in part or in full,  during occupation subject to the terms of their Equity Loan Agreement.

Partial Repayments

If a home owner elects to partially repay the equity loan there is no limit to the number of repayments they may make. However if the balance of the equity loan was to reduce below the minimums detailed below, the equity loan  will become repayable in full.  The options to repay vary between the different products.

MyChoiceHomeBuy:

• The minimum repayment must at least be 10% of the equity loan;
• final repayment must not be less than 10%
• repayment must be within 3 months of the valuation date
• repayment is not available during the first 12 months

Ownhome:

• Repayment not available during the first 3 months
• The minimum repayment must at least be 5% of the equity loan;
• final repayment must not be less than 5%
• where the current value is less than the original , the original valuation will continue to apply for 3 years

Calculation of repayments

The amount of the equity loan to be repaid is calculated as a percentage of the property value at the time of  repayment or sale - but see above re Ownhome partial repayments where values have reduced . The percentage to be paid is the same percentage that the equity loan represented at the time of the original purchase by the applicant.

For simple worked examples follow the asterisk  

 

5.5 Early Redemption of the Equity Loan

5.5.1 The home owner may serve a written request on the Equity Loan Provider for a settlement statement. The Equity Loan Provider must give the individual this statement in accordance with the terms of the Equity Loan Agreement.   

 

5.6  Sub-Letting 

5.6.1 The Requirements for OMHB are the same as for NBHB, in particular that the property purchased should be the applicant’s main residence. See NBHB 5.3.21.  NB – for OMHB, read “owner” where the NBHB text refers to “leaseholder” or “shared owner”.

5.7 Re-sales

5.7.1 When someone wishes to sell their property on the open market, and is therefore required to redeem their OMHB equity loan, they must first notify their mortgage lender and the Equity Loan Provider. Please note, there are no eligibility criteria for subsequent purchasers.

5.7.2 The conventional mortgage lender will arrange for the property to be valued by an independent RICS qualified valuer, assuming a sale on the open market with vacant possession. 

5.7.3 The disposal price will be at the current Market Value excluding additions/improvements undertaken by the home owner so long as the Equity Loan Provider had agreed in writing to those  works before they were started. For additional comment follow the asterisk  

 

5.7.4 In cases where the owner and lender cannot agree the valuation/sale price, the Lender may arrange a further independent valuation nominated in accordance with the Equity Loan Agreement. The lower of the two valuations will be used to calculate the shared appreciation.

5.7.5 All valuation fees are payable by the home owner.

5.7.6 On receipt of the home owner's equity loan repayment,  the Equity Loan Provider will be required to process that receipt in accordance with the terms agreed with the Corporation and the relevant clauses in their Equity Loan Contract.

5.8 Key Workers - Special Provisions

5.8.1 The Equity Loan Provider's equity loan must be repaid
1. on sale of the property or
2. on transfer of the property.

5.8.2  What if the eligibility criteria change?  see NBHB 5.7.6 Guidance.
 
 
5.8.3  All other NBHB Key Worker Requirements apply to OMHB Key Worker schemes
 
5.8.4 If a key worker home owner received an equity loan prior to 2nd October 2006 (so not through the Expanded programme) they are entitled to move that loan to a new property as long as they are still in housing need.  There will not be any facility to top up the loan if they need more help.

5.8.5 If a key worker owner received an equity loan prior to 2nd October 2006 and wants to move property but will require further assistance they will need to reapply to the programme and be reassessed like a new applicant.

5.8.6 If a key worker receives an equity loan via the 08/11 Open Market HomeBuy programme and wants to move, they are entitled to move that loan to a new property as long as they are still in housing need. In cases where further assistance is needed the key worker will need to reapply to the programme and be assessed like a new applicant.

5.8.7 Like-for-like transactions will be permitted in certain circumstances. Successful applicants should speak to their current lender about the cost implications of moving, before deciding to proceed. Where a home owner moves house within the Open Market HomeBuy programme, but remains with the same lender, their selected lender may look to refund any early repayment charges paid.

5.8.8 When exercising the portability option the key worker will be expected to meet the associated administration fee from the capital gain to meet the costs incurred by the HomeBuy Agent for managing the process.

5.8.9 The Equity Loan Provider will be responsible for managing the process and recycling monies.  If the original equity loan had been advanced by an RSL that is not currently an Equity Lioan provider then the responsibility for the loan must pass to the appropriate Equity Loan Provider when the beneficiary buys the new property.  The loan itself will remain a second charge and simply be transferred from one property to another.  The originating RSL would relinquish responsibility for the property and the loan by assigning the second charge and the management responsibility to the Equity Loan Provider at the time of the purchase of the new property.  

5.8.10 If  the decision to move is taken, the home owner must either have completed the sale of their existing property, or be in the process of completing the sale of their existing property at the same time as buying for the second time through HomeBuy. This is to avoid a situation in which a owner ends up holding two HomeBuy equity loans simultaneously.