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Help to Buy and Home Ownership Schemes | A Mortgage Network Guide

Help to Buy and Home Ownership Schemes

Help to Buy and Home Ownership Schemes


Let’s dive deeper into unravelling the essence of the title. The title serves as a gateway to the core theme or concept under our article discussion. So, as we embark on this intellectual voyage, let’s peel back the layers and illuminate the intricacies embedded in the title, “Help to Buy and Home Ownership Schemes” unravelling its significance in the broader tapestry of our discourse.

What is Help to Buy ?

The ‘Help to Buy’ initiative plays a pivotal role in easing the entry into the property market for first-time buyers. By requiring only a modest 5% deposit, it significantly reduces the initial financial hurdle that often poses a challenge for individuals aiming to purchase their first home. Furthermore, the scheme offers an additional boost by allowing borrowers to secure a loan equivalent to 20% (or 40% in London) of the property’s purchase price on an interest-free basis for the first five years.United Trust Bank

This unique combination of a lower deposit requirement and interest-free assistance aims to empower individuals, making home ownership a more attainable goal and fostering a sense of financial stability for aspiring homeowners.

While some components of the ‘Help to Buy’ program, such as the Help to Buy ISA and the Help to Buy: Equity Loan scheme in England, have concluded, its legacy continues to shape the landscape of accessible home ownership opportunities in the UK.

When do the Help to Buy: Equity Loan schemes come to a close? |  The Help to Buy: Equity Loan scheme in England will come to an end on October 31, 2022.

How to pay back your loan

Repaying your loan is a straightforward process with the following guidelines: The equity loan remains interest-free for the initial five years. Starting from the sixth year, a 1.75% interest rate applies, subject to an increase by the Consumer Price Index (CPI) plus 2% (1% if you obtained the equity loan before December 2019). The repayment of the equity loan is due after 25 years or earlier if you decide to sell your home.

The repayment amount is determined by the same percentage as the initial equity loan—meaning, if you initially received a 20% equity loan based on your home’s purchase price, you are required to repay 20% of the proceeds from the eventual sale. Consequently, any increase in your home’s market value will correspondingly raise the amount owed on your equity loan, while a decrease in home value will result in a proportional reduction in the repayment amount.

What is a shared ownership? 

Shared ownership presents a unique opportunity for first-time buyers and those without current homeowners to acquire a stake in a new build or resale property. The buyer finances a mortgage for the share they own while paying a subsidised rent to a housing association for the remaining share. The distinctive advantage lies in the reduced deposit requirement, as the mortgage is only necessary for the purchased share, making homeownership more accessible.

Over time, purchasers can choose to increase their ownership stake through ‘staircasing,’ a process that allows them to attain full ownership, often up to 100% gradually. Upon reaching full ownership, the shared owner ceases rent payments and solely manages their mortgage, along with any applicable service charges and ground rent, offering a path to complete autonomy in their property.

Wondering why opt for a shared ownership home?

Shared Ownership presents a viable home-buying solution for individuals aspiring to own a property but find the open market beyond their financial reach. The appeal of Shared Ownership lies in its cost-effectiveness, offering lower expenses compared to alternative housing options.

Which Mortgage Network Should I Join?Rental rates are notably reduced, typically set at 2.75% of the property value per annum—less than the prevailing market rates. Additionally, the flexibility of Shared Ownership allows you to initiate the purchase with as little as a 25% share under the existing scheme, or as minimal as 10% with the updated Shared Ownership model.

The deposit requirement is 5-10% of the share price, not the entire market value of the property. Notably, Stamp Duty Land Tax (SDLT or ‘Stamp Duty’) can often be deferred until your ownership share reaches 80%.

Beyond financial advantages, Shared Ownership homes are often integrated into private developments, addressing planning permission requirements and bringing affordable housing to coveted areas, making it an attractive prospect for those seeking both financial prudence and location convenience.

What are the criteria for eligibility in the Shared Ownership program?

Individuals must meet certain general requirements to be eligible for a Shared Ownership home. The overarching eligibility criteria for Shared Ownership are outlined as follows:

  1. Minimum Age: Prospective buyers must be at least 18 years old.
  2. Annual Household Income:
    • Outside of London: The annual household income should not exceed £80,000.
    • In London: The annual household income should not exceed £90,000.
  1. Home Ownership Status: While Shared Ownership is often aimed at first-time buyers, individuals who already own another property are eligible if they are actively in the process of selling it.
  2. Affordability on the Open Market: Applicants should be unable to afford a home that meets their housing needs on the open market.
  3. Financial Stability:
    • No Mortgage or Rent Arrears: Applicants must not be in mortgage or rent arrears.
    • Positive Credit History: Applicants should demonstrate a favourable credit history, free from any instances of bad debts or County Court Judgements.
    • Financial Capability: Applicants must show the ability to meet regular payments and cover the costs associated with home purchase.

Meeting these eligibility criteria ensures that individuals participating in the Shared Ownership program are well-suited to the requirements and responsibilities of home ownership.

What factors should I consider when opting for Shared Ownership?

The government’s innovative part-buy, part-rent initiative has been a stepping stone for numerous individuals in acquiring their dream homes over the past four decades.

However, the decision to embrace Shared Ownership is not one to be taken lightly; it demands thorough research to ensure that your choice aligns perfectly with your needs and preferences.
Shared Ownership properties are typically sold on a leasehold basis.

Depending on the specific property and the duration of your intended residence, it becomes crucial to anticipate the potential need for lease extension during your tenure. Additionally, gaining a comprehensive understanding of how various costs, including service charges, rent adjustments, and maintenance expenses, are calculated is paramount.

Furthermore, it’s essential to delve into the intricacies of the lease terms, grasping the nuances of any restrictions or obligations that may affect your homeownership experience. This level of diligence ensures that you navigate the Shared Ownership journey with clarity and confidence, making well-informed decisions every step of the way.

Remember, the path to Shared Ownership can be smoother when armed with knowledge, and considering these aspects will empower you to make informed choices, fostering a positive and fulfilling homeownership experience.

Where does Connect Network fits in this equation? 

connect for intermediaries

In specialised mortgage products like Help to Buy and Home Ownership Schemes, Connect is a pivotal force, orchestrating a symphony of opportunities for both mortgage brokers and clients. As a premier mortgage network, Connect serves as a guiding beacon, offering an extensive guide to navigate the intricate landscape of these programs.

Through Connect, mortgage brokers gain access to a wealth of knowledge and resources, ensuring they are well-equipped to assist clients in leveraging the benefits of Help to Buy and Home Ownership Schemes.

The network facilitates seamless transactions and plays a crucial role in disseminating updated information on the ever-evolving policies and intricacies surrounding these specialised mortgage products.

Connect’s commitment to excellence and comprehensive support cements its position as an indispensable ally in pursuing home financing solutions, making the journey through Help to Buy and Home Ownership Schemes a smoother and more informed experience for all involved parties.