There are a number of government backed schemes designed to help first time buyers get on the housing ladder. We answer your questions about one such scheme - Shared Ownership.
What is Shared Ownership?
Shared ownership is an affordable way of getting onto the property ladder, based on the idea of buying a share of your home and paying rent on the rest.
For instance, you might buy a 25%, 50% or 75% share in your home, then pay a small monthly rent on the part that you don't buy. The bigger the part that you purchase, the less rent you have to pay. There are a series of government schemes design to help people buy homes in this way – the HomeBuy schemes.
What are HomeBuy schemes?
HomeBuy schemes help people to buy homes on a shared ownership basis. They are open to households earning less than £60,000 a year who would otherwise be unable to buy.
Who can use the HomeBuy schemes?
You may be eligible if you are a first time buyer, a previous home owner who can't now afford to buy without help, a housing association or council tenant, or a ‘key worker’ (for instance a nurse or a teacher).
What kind of home could I buy through the HomeBuy schemes?
There are two HomeBuy options:
- Social HomeBuy can help people living in council and housing association properties to buy a share of their home at a discount
- New Build HomeBuy helps people to buy a share of a newly built property and pay rent on the rest
Who can apply?
You may be eligible for Social HomeBuy if you are a local authority or housing association tenant and your landlord offers the scheme, you live in an eligible property and have been living there for a at least two years (five years if you became a tenant after 18 January 2005) If you have a joint tenancy, you will normally buy with the other tenant. You can also include up to three members of your family, as long as they have lived with you for 12 months before you apply.
The New Build scheme is open to households earning less than £60,000 a year who would otherwise be unable to buy a home. You may be eligible if you are a first time buyer, a previous home owner who can't now afford to buy without help, a Housing Association or Council tenant or a ‘key worker’ (like a nurse or teacher).
How do I raise the money to pay for my share?
The vast majority of people buying a home through a shared ownership scheme will apply for a specialist Shared Ownership mortgage. These are mortgage products designed specifically to work with these schemes, though they will differ from lender to lender.
As with any mortgage the trick is to find one that suits your circumstances and your ability to keep up the repayments, so it’s best to shop around and read the terms and conditions carefully before committing. If you're not sure where to start it's a good idea to seek specialist mortgage advice.
Social HomeBuy
How does it work?
Social HomeBuy offers people the chance to buy a share of their housing association or council-owned home. It also gives discounts of between £9,000 and £16,000 depending on where the property is and how big a share you buy.
Tenants can buy a minimum 25 percent share of the value of the property and pay an initial rental charge of not more than three percent of the market value of the remaining share owned by the landlord.
How do I apply?
You should apply directly to your landlord (the local Council or a Housing Association). If you are a Local Authority tenant get in touch with your local Council.
Why might my application be turned down?
You might be refused if you have an assured shorthold tenancy, have been issued with a suspension order relating to anti-social behaviour, are undergoing bankruptcy proceedings or have been issued with a court order that means that you must leave the property.
New Build HomeBuy
How does it work?
The scheme allows people to buy a share of a newly built property. The rest of the cost of the property is shared with a housing provider, like a Housing Association. It is available for some properties in some areas of England and is run by ‘HomeBuy agents’, who can help you through the application process - assessing your eligibility for the scheme and then looking at the options available in your area.
You'll need to meet between 25 and 75 percent of the cost of the property through a mortgage and/or savings. Then, you'll pay rent on the remaining share of the property to the housing provider.
The housing provider will set your initial rent at a maximum of three percent of their share of the property (in the first year). If you can afford it, you may buy an additional share of the property later, though you'll have to pay what it is worth at the time you purchase it.
Are there any other costs involved?
In most cases you'll also need some money to cover the costs of buying a house, like legal fees, any deposit, and possibly Stamp Duty.
How do I apply?
If you think you are eligible for the New Build HomeBuy scheme, contact your local HomeBuy agent. If you are a key worker, you should contact the HomeBuy agent for the area where you work.
What about Open Market HomeBuy?
This element of the scheme has now been closed, with the government preferring to focus on "products which help first time buyers and simultaneously maintain activity in the house building sector through new build".
What if I can’t afford to buy a share of a property?
You could get help through ‘Rent to HomeBuy’. The scheme allows you to rent a newly built property for a fixed length of time. During this time, you would need to save a deposit – allowing you to buy a share of the property through the New Build HomeBuy scheme.
How does it work?
Your local HomeBuy agent will make sure you qualify for the scheme and then look at the options available in your area. There are certain newly built properties that you can rent at an affordable rate - 80 percent (or less) of the market rent.
The Rent to HomeBuy scheme is designed to give you time to save enough money for a deposit to buy the property - you can rent the property for up to five years and will have first option to buy the property during that time.
What happens when the tenancy ends?
At the end of the five-year period your situation will be assessed again. If you can afford it, you can buy part of the property under the New Build HomeBuy scheme.
How do I apply?
If you think you are eligible for help to get a home through the Rent to HomeBuy scheme, contact your local HomeBuy agent. If you are a key worker, you should contact the HomeBuy agent for the area where you work.
