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Help to Buy and Home Ownership Schemes | IFA Network Guide

Help to Buy and Home Ownership Schemes

Help to buy and home ownership schemes


Our previous publication discussed “Help to Buy | Are You Ready For The Next Phase? | 2021 .” Let’s dive deeper into unravelling the essence of the title, “Help to Buy and Home Ownership Schemes”. This title serves as a gateway to the core theme of our discussion. We will peel back the layers as we embark on this intellectual journey.

This will illuminate the intricacies embedded in the “Help to Buy and Home Ownership Schemes” title, revealing its significance in our broader discourse.

What is Help to Buy?

The ‘Help to Buy’ initiative is crucial for easing first-time buyers into the property market. It requires only a modest 5% deposit, significantly reducing the initial financial hurdle. This often poses a challenge for individuals aiming to purchase their first home.

Furthermore, the scheme offers an additional boost. Borrowers can secure a loan equivalent to 20% (or 40% in London) of the property’s purchase price. This loan is interest-free for the first five years.

United Trust Bank

This combination of a lower deposit and interest-free assistance empowers individuals. It makes homeownership more attainable and fosters financial stability for aspiring homeowners.

Some components of the ‘Help to Buy’ program have concluded, such as the Help to Buy ISA and the Help to Buy: Equity Loan scheme in England. However, its legacy continues to shape accessible homeownership opportunities in the UK.

When does the Help to Buy Equity Loan scheme end? The scheme in England concluded on October 31, 2022.

Help to Buy and Home Ownership Schemes | How to pay back your loan

Repaying your loan is straightforward with these guidelines. The equity loan is interest-free for the first five years. From the sixth year, a 1.75% interest rate applies. This rate increases by the Consumer Price Index (CPI) plus 2%. If you obtained the equity loan before December 2019, the increase is only 1%.

If you sell your home, you must repay the equity loan after 25 years or earlier. The initial loan percentage determines the repayment amount. For instance, if you received a 20% equity loan, you must repay 20% of the sale proceeds.

Any increase in your home’s value raises the repayment amount. Conversely, a decrease in value reduces the repayment amount. This ensures that the loan repayment reflects changes in the market.

Understanding these terms can help you plan for the future. It’s essential to stay informed about your obligations. Knowing how your repayment is calculated will aid in making sound financial decisions.

Keep track of interest rates and market values. This will ensure that you are prepared for your repayment.

What is shared ownership? 

Shared ownership presents a unique opportunity for first-time buyers to own a part of a new build or resale property. Buyers finance a mortgage for their share while paying subsidised rent to a housing association for the remaining share. The main advantage is the reduced deposit requirement. Buyers only need a mortgage for the purchased share, making homeownership more accessible.

Over time, buyers can increase their ownership stake through ‘staircasing’. This process allows them to reach full ownership, often up to 100% gradually. When they attain full ownership, shared owners stop paying rent and manage only their mortgages. They also handle any service charges and ground rent. This offers a path to complete autonomy in their property.

Help to Buy and Home Ownership Schemes | Wondering why opt for a shared ownership home?

Shared Ownership offers a viable solution for individuals who find the open market beyond their financial reach. The scheme is cost-effective, providing lower expenses compared to other housing options.

Which Mortgage Network Should I Join?

Rental rates are notably reduced, set at 2.75% of the property value per annum. This rate is less than the prevailing market rates. Additionally, the flexibility of Shared Ownership allows purchases to begin with as little as a 25% share under the existing scheme. You can start with as little as 10% with the updated model.

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

Beyond financial advantages, Shared Ownership homes are often integrated into private developments. This integration addresses planning permission requirements and brings affordable housing to desirable areas. Therefore, it is an attractive option for those seeking both financial prudence and location convenience.

Help to Buy and Home Ownership Schemes | What are the criteria for eligibility in the Shared Ownership program?

Individuals must meet certain requirements to be eligible for a Shared Ownership home. The primary eligibility criteria for Shared Ownership include:

Minimum Age: Buyers must be at least 18 years old.

Annual Household Income:

  • Outside London: The annual household income should not exceed £80,000.
  • In London: The annual household income should not exceed £90,000.

Home Ownership Status: Shared Ownership is often for first-time buyers. However, those owning another property are eligible if they are selling it.

Affordability on the Open Market: Applicants should be unable to afford a suitable home on the open market.

Financial Stability:

  • No Mortgage or Rent Arrears: Applicants must not have mortgage or rent arrears.
  • Positive Credit History: Applicants should have a favourable credit history without bad debts or County Court judgments.
  • Financial Capability: Applicants must meet regular payments and cover home purchase costs.

Meeting these criteria ensures participants are well-suited to the Shared Ownership program’s requirements and responsibilities.

Help to Buy and Home Ownership Schemes | What factors should I consider when opting for Shared Ownership?

The government’s innovative part-buy, part-rent initiative has helped many acquire their dream homes over four decades. However, embracing Shared Ownership requires thorough research to ensure it aligns with your needs and preferences.

Shared Ownership properties are usually sold on a leasehold basis. Depending on the property and your intended residence duration, anticipate needing a lease extension. Additionally, understanding how costs, including service charges, rent adjustments, and maintenance expenses, are calculated is crucial.

Delve into the lease terms to grasp any restrictions or obligations affecting your homeownership experience. This diligence ensures you navigate Shared Ownership with clarity and confidence. Well-informed decisions at every step are essential.

Knowledge smooths the path to Shared Ownership. Considering these aspects empowers you to make informed choices, fostering a positive homeownership experience.

Help to Buy and Home Ownership Schemes | Where does Connect Network fit in this equation? 

Connect is a pivotal force in specialised mortgage products like Help to Buy and Home Ownership Schemes. It orchestrates opportunities for both mortgage brokers and clients. As a premier mortgage network, Connect offers a guiding beacon. It provides an extensive guide to navigating these intricate programs.

Through Connect, mortgage brokers access a wealth of knowledge and resources. This ensures 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 is crucial in disseminating updated information. This includes 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. It plays a vital role in pursuing home financing solutions. This makes the journey through Help to Buy and Home Ownership Schemes smoother. It also ensures a more informed experience for all involved parties.

We’ve reached the end of our publication on “Help to Buy and Home Ownership Schemes.” Stay with Connect until next time!