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Low cost home ownership

Government funded schemes to help people who cannot afford to buy a property, but wish to do so.

There are various low cost home ownership options available to help people buy their own home. These include:

  • Shared ownership, for owning a share of a home.
  • Help to Buy Equity Loan, for brand new homes in England.

Shared ownership

This is to help people with small deposits and lower incomes get on the property ladder. You can buy a share in a property (from 25% to 75% of its value) and pay rent on rest. People have the ability to buy a larger share when they can afford to and 'staircase' up to full ownership if this is desired.

You typically need to put down a minimum 5% deposit, but that is only on your share rather than the total property price. You pay for the rest of your share with a mortgage.

It is important to note that you cannot buy any property you want under the shared ownership scheme. Generally only properties that have been specifically built for shared ownership can be bought through this scheme or re-sales. (Re-sales, where a shared ownership property that was owned by someone else is being sold under the shared ownership scheme.)

Shared ownership properties are always leasehold.

Advantages of shared ownership

  • It offers you the opportunity to get onto the property ladder quicker than if you were buying a home outright.
  • The 'staircasing' element of shared ownership allows you to buy more shares as time goes on or pay off more of your mortgage.
  • It may be cheaper than renting privately.
  • You can sell a shared ownership property at any time. You will benefit from any increase in value in the property since you bought it.

Disadvantages of shared ownership

  • Not every house is available for shared ownership. You will have to buy where the shared ownership properties are, which may not be your preferred place.
  • If the value of the property increases, the shares will become more expensive. This means it can be difficult to staircase (build up the share you own).
  • If the value of the property decreases, the value of your share will also decrease accordingly.
  • Typically you will have to pay a service charge. Though, this is generally true with all leasehold properties, whether they are shared ownership or not.

Eligibility for shared ownership

You could buy a home through Help to Buy: Shared Ownership in England if:

  • Your household earns:
    • £80,000 a year or less outside of London;
    • or your household earns £90,000 a year or less in London.
  • You are a first-time buyer or you used to own a home but cannot afford to buy one now.
  • You are an existing shared owner looking to move.

Help to Buy Equity Loan

This scheme helps potential homebuyers who are struggling to save for a deposit to get onto the housing ladder.

With this:

  • The Government lends you up to 20% of the cost of your newly built home (up to 40% in London) in order to increase your deposit.
  • This can help give access to cheaper mortgage rates. (This makes the initial costs more affordable and opens up the possibility of buying a more expensive property.)
  • Equity loans are interest free for the first five years.
  • They can only be used to buy new-build properties in England, worth up to £600,000.

Before you apply, you should consider the long-term effect. Potentially, it could cost you thousands of pounds more, when compared to a traditional mortgage. Independent advice from a mortgage broker is recommended to help you decide what is right for you.

Eligibility for Help to Buy Equity Loan

To apply for an equity loan, you must either be a first-time buyer or a previous homeowner who no longer owns a property. From 2021, only first-time buyers will be able to apply.

You will also need to be able to put up at least a 5% deposit.

For more details, visit: Helping you to own your home (GOV.UK).

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