Help on the Property Ladder
It seems that even with the news of falling house prices across the UK many people are still finding it difficult to buy a home of their own. Although the average UK property price dropped to £179,110, overall property prices are still 11% higher than two years ago, and 47% higher than 5 years ago*.
People are therefore living at home longer or being forced into renting privately; normally the more expensive option and often available only on short term tenancies, leaving many people to live in uncertainty.
However there are now easier routes to climbing onto the property ladder. A number of schemes have been designed to help; many of which are part funded by the government. These schemes are available to those who cannot afford to buy a home outright in the area they live or work. Priority is usually given to people who are already housing association or council tenants and to key workers; however they are also available to first-time buyers.
The schemes currently available are:
New Build HomeBuy
Traditionally known as shared ownership, New Build HomeBuy is a scheme whereby new properties are developed and sold on a part-buy, part-rent basis. This means that you buy a share in your home (this can be as little as 25% or as much as 75% dependent on your own circumstances and the property in question) and you pay a subsidised rent on the share that you do not own. You have the option to buy more shares in the property as and when you feel you can afford to. Recent changes to Stamp Duty Land Tax rules mean that those buying a home through New Build HomeBuy can also opt to pay no stamp duty until they reach 80% ownership. This helps to keep the initial purchase costs down.
Example: For a home valued at £222,000 you would need a mortgage of £110,000 for a 50% initial purchase. Although you would need to pay rent and any service charges applicable to your property in addition to your mortgage, your total monthly outgoings would be less than if you were to buy the same property outright.
A couple would need a joint income of around £40,000 to buy a New Build HomeBuy property valued at £220,000, whereas on the open market, you would need to earn over £73,000 (based on 3 x gross joint income).
First-Time Buyers Initiative (FTBI)
This is a scheme that aims to help eligible first-time buyers to purchase a share in a newly built home, bought from a participating developer. Buyers must purchase at least 50% of the property and English Partnerships, a Government agency will retain the rest. After living in the home for three years, buyers will start to pay a charge to English Partnerships for the share they do not own. English Partnerships can also retain a share of the future sale proceeds.
Example: Based on a property valued at £220,000 you would have to buy at least 50% of the property for £100,000. This means you could buy with an annual income (single or joint) of approximately £33,000. After you have owned the home for three years, a rent starts to be charged on the un-owned 50%, which would be £91 per month, increasing to £275 per month in year five and thereafter.
Social HomeBuy
This scheme choice allows existing housing association or council tenants to buy a share in the home they currently live in, on a shared ownership basis, with an element of discount to assist the purchase. In some cases it may help them to own their home outright. The landlord of the rented property must have opted to take part in the scheme. In the majority of cases homes are sold to their existing tenants on a shared ownership basis, with a minimum share sale of 25%. The maximum discount applied to any share sold will vary between £9,000 and £16,000, depending on the location of the property. A rent is charged on the share of the property this is not owned.
Example: Based on a maximum discount of £16,000 and a property valued at £220,000. If you bought a 50% share you would receive a discount of £8,000, so you would therefore have to raise a mortgage for £102,000 for your share and pay a rent of approx £252 per month, plus a service charge (if applicable).
Open Market HomeBuy (OMBH)
There are two schemes involved with OMBH. They enable you to purchase a home on the open market with the assistances of an equity loan. Equity loans are tied to the value of the home you purchase, so over a period of time, if the value of the property increases, so will the amount you need to pay back.
There are now two distinct Open Market HomeBuy Products : Ownhome and MyChoiceHomeBuy.
Source: HomeFocus Magazine