FINANCIAL INFORMATION ON HOMEBUY Valid up to 1st October 2006

The loan provided through Affordable Homes Cumbria is available only to a restricted group of people that consists of existing tenants of Registered Social Landlords and Local Authorities or those on housing waiting lists. You may write or telephone Affordable Homes Cumbria for a written quotation about the loan.

This loan must be secured by a mortgage over the home you buy.

YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED ON IT.

You may repay the loan at any time but it must by repaid if you sell your home. You only have to make one repayment which is 25% of the market value of your home at the date of repayment.

The amount you repay will depend on the state of the house market where you live at the date of repayment. This means you may pay more or less than the amount you were originally lent. If you have to repay more than you borrowed the effect will be similar to a loan under which you pay credit charges at the rate at which your home has increased in value. For example, if your home increases in value by 4 percent or 8 percent a year, the sum you will repay will be equivalent to borrowing under a loan with an APR of 4.0 or an APR of 8.0.

The examples below show how much the loan repayment and APR equivalent would be in various situations.

Examples
You buy a home for £60,000 and Affordable Homes Cumbria provides you with £15,000 a quarter of the purchase price. In five years time you want to sell your home and house values have risen. Assume house prices have increased by about 5% a year, so that your home would be worth £76,577. In this example you would repay a quarter of the value when you sell the home, which is £19,144. As you are repaying more than you borrowed from Affordable Homes Cumbria the amount you repay would be equivalent to borrowing the money at an APR of 5.06%.

You buy a home for £67,000 and Affordable Homes Cumbria provides you with £16,750 a quarter of the purchase price. In nine years time you want to sell your home and house values have risen. Assume house prices have increased by about 3% a year, so that your home would be worth £87,420. In this example you would repay a quarter of the value when you sell the home, which is £21,855. As you are repaying more than you borrowed from Affordable Homes Cumbria the amount you repay would be equivalent to borrowing the money at an APR of 2.96%.

You buy a home for £74,500 and Affordable Homes Cumbria provides you with £18,625 a quarter of the purchase price. In three years time you want to sell your home and house values have risen. Assume house prices have increased by about 4% a year, so that your home would be worth £83,802. In this example you would repay a quarter of the value when you sell the home, which is £20,950. As you are repaying more than you borrowed from Affordable Homes Cumbria the amount you repay would be equivalent to borrowing the money at an APR of 3.85%.

If you would like a specific calculation please contact Jennifer Campbell at Affordable Homes Cumbria on 0800 3581 400.

Formula and illustration for calculation of an APR equivalent
Assume you buy a home in London for £100,000 and Affordable Homes Cumbria provides you with £25,000 a quarter of the purchase price. In seven years time you want to sell your home and house values have risen. Assume house prices have increased by about 6% a year, so that your home would be worth £150,363. In this example you would repay a quarter of the value when you sell the home, which is £37,591. As you are repaying more than you borrowed from Affordable Homes Cumbria the amount you repay would be equivalent to borrowing the money at an APR of 5.96%. The APR equivalent rate, which illustrates the increase in the sum repayable on the sale of the property as an effective rate, is given by the following formula:

R is the amount of the repayment due on the sale of the property;
P is the amount of credit advanced under the agreement; and
t is the period beginning with the relevant date and ending with the date of repayment, expressed in years.

The results of the calculation being rounded to two decimal places see below for the worked example:

R = £37,591
P = £25,000
t = 7 years

The APR equivalent is therefore 5.96%