Shared ownership schemes

Many UK residents are still in need of financial help to buy a home, so what options are available to you?
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The Government’s Help to Buy mortgage guarantee closed to applications at the end of 2016. Many UK residents are still in need of financial help to buy a home though, so what options are available to you?

1. Help to Buy equity loan

For most hopeful home hunters, getting a sufficient deposit together to be able to make an offer is that hardest part. A low-interest Government loan towards your deposit could be the answer.

To get started, you will need to have enough capital to put down a 5% deposit. The Government will then lend you a further 20%, or 40% if you are in London. Lastly, you will need to secure a mortgage of up to 75%.

In addition to the finances, there are some additional criteria that must be filled in regards to eligibility. Namely, the house you buy must:

  • Be a new build.
  • Be the only one you own.
  • Not be sub-let or rented out after you buy it.
  • Have a market value of up to £600,000 (£300,000 in Wales).

Re-paying the loan

As with your mortgage, you will need to set up monthly repayments for your equity loan, but only in the sixth year after your purchase. In your sixth year you will be charged 1.75% of the loan’s value. You are obliged to pay back the loan after 25 years (or when you sell your home).

2. Help to Buy ISA

Shared housing ownership between those who are not related to your immediate family is becoming more and more prevalent as friends combine finances to get a foot on the property ladder. In this case, the Help to Buy ISA is a scheme whereby the Government top up your savings by up to £3,000. Any friend you are planning to buy with can also get a Help to Buy ISA for the same amount. And the most obvious benefit to this scheme is that you don’t need to pay it back.

To take advantage of this scheme you will need to purchase a home with a market value of up to £250,000 (£450,000 in London). It must also be your only property and be where you intend to live, so it cannot be sublet.

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3. Shared ownership

One scheme growing popularity now that the Help to Buy mortgage has ended is buying through shared ownership. In this situation, you can buy a share of a property (25%-75%) and pay rent on the remaining share. Shared ownership is available through housing associations in your area of the UK.

To apply through your local housing associations, you must:

  • Be a first time buyer.
  • Or used to own a property but can no longer afford to buy.
  • Or are an existing shared homeowner.
  • Have a household income of less than £80,000 per annum (£90,000 in London).

Once you are the homeowner you can choose to buy more shares in the property, which will reduce the rent you pay. The cost of buying more shares will be determined by how much your home is worth, changes in property prices in your area as well as inflation.

The process of buying more shares is referred to as staircasing. Determining the cost of more shares will usually mean getting your property valued, in which case you would be liable for the valuer’s fees.

Selling your property on

The housing association has right of first refusal if you decide to sell your house. This means that they can buy your share of the property back. If they choose not to then you can seek alternate buyers, although the housing association also has the right to find buyers.

If you have bought out the housing association and own the property outright, then you can sell it on the open market.

Note: Shared ownership properties are always leasehold, and your landlord can choose to sell on the lease. As tenant, you would usually also be offered first right of refusal in this case.

There are also variations of these schemes available for council tenants, housing association tenants, older people and disabled people.