With house prices rising significantly faster that salaries*, it’s a well-known problem, that people are struggling to get on the housing ladder. The Government recognised the issue and created two schemes to help those in these situations - The Help to Buy Shared Ownership scheme and Help to Buy Equity Loan scheme.
The Shared Ownership scheme works by you buying a percentage of the property (between 25% and 75%) and paying rent on the remaining part. In the future, if you can afford to, you are able apply to buy a bigger share of the property.
To be eligible for the scheme:
• Your household must earn £80,000 or less (if you live outside of London), £90,000 if you live in a London borough.
This scheme allows you to buy either a new build or an existing home through the resale programme from the housing association. It’s important to note that shared ownership properties are also leasehold (you own the property for the duration of the lease, but the ownership reverts back to the landlord when the lease ends). You will need to take out a mortgage to pay for your part of the purchase price or you can pay for this with savings.
Military personnel are given priority over other groups through government funded shared ownership schemes. Some local councils have their own priority groups for their own shared ownership home-building programmes and these are normally to deal with housing needs in the local area.
A Help to Buy Equity Loan works differently; the Government will lend you up to 20% of the cost of your newly built home. You’ll need to find a 5% cash deposit and the remainder is made up of a 75% mortgage. The Government doesn’t charge you any fees on the 20% loan for the first 5 years, but you will need to make arrangements after that to pay back the 20% loan or you will be charged fees.
Below is an example of purchasing a home worth £200,000. Your deposit of 5% would be £10,000, the Government loan would cover £40,000 and then you would be required to obtain a 75% mortgage for £150k.
The Help to Buy scheme for London works slightly differently as the Government recognises that house prices in Greater London are significantly higher. The equity loan available from the Government for new homes in a London borough is 40%.
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