With Shared Ownership week on the horizon (20-26 September)it has never been more vital to communicate the different options available to those looking to get on the housing ladder. Too many Londoners think they can afford to rent but not to buy; many shared ownership schemes turn that notion on its head.
Unfortunately, first-time buyers can find themselves faced with a wall of jargon. Knowing which scheme is best for you can be a challenge and once you’ve found your best option, the sales process can be filled with confusing terminology.
To make it easier, we’ve compiled details of the different Help to Buy/shared ownership schemes that are available. All of the schemes are designed to make home ownership an option for someone who can’t afford a house or a deposit outright but there are important differences between them.
Help to Buy equity loan – With a Help to Buy equity loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home. Help to Buy allows first-time buyers get onto the housing ladder a lot sooner than they may otherwise have been able to.
Help to Buy ISA – If you’re saving to buy your first home, the government will top up your savings by 25% (up to £3,000) and if you’re buying with someone else, they can also get a Help to Buy ISA. This is a great way for people to raise the funds a little quicker for their first deposit.
Shared Ownership – You start by buying a share of a property – usually between 25 – 75% with a mortgage. The rest is owned by a housing association whom you pay rent to. Basically, you buy a bit and you rent a bit. The scheme is aimed at families or individuals (your maximum income must not exceed £80,000 outside of London and £90,000 for inside of London per annum) unable to purchase a suitable home on the open market. There is a common misconception about shared ownership that these properties are inferior. This is untrue. These homes come with a good specification and are built to the same high standards as any new build property.
There are some restrictions on these schemes and unfortunately, there is not a ‘one size fits all’ option for those looking to buy their first home. To find out more about the schemes available and the restrictions, visit: https://www.helptobuy.gov.uk/
Other terminology you can encounter during the sales process can also be opaque to the uninitiated. Here are some keys terms that it’s useful to know.
Part-rent, part-buy – This is another way to describe Shared Ownership.
Market Value – Refers to the total value of your property should you buy it outright. This figure is used to calculate the value of your share when buying through Shared Ownership.
IFA – IFA or independent financial adviser is a person or a company that can advise on a large range of mortgage products.
Staircasing – After an agreed amount of time, you can purchase a larger share of your home, the greater the share you own, the less rent you will have to pay.
Conveyancing – A term used to describe the process, conducted by a legal professional, of the preparation of documents linked to the buying and selling of a property.
Service Charge – Residents of a development pay this as a charge for the upkeep of communal areas such as gardens and hallways.
Completion – The point at which the buyer becomes the legal owner of the property. Legal completion is handled by the solicitors of both the buyer and seller.
Stamp Duty – A government tax that you pay on completion.
The government and housing associations haven’t purposely tried to make the buying process confusing but for home buyers it can add an unnecessary layer of complexity. Knowing your way around the different schemes should allow you to make the most of the opportunities available to help you onto the property ladder and buy your new home.