Many are finding it difficult to get on to the property ladder in the current financial climate. Affordable housing schemes usually include properties that are offered for sale or rent below the market value. These schemes are aimed at specific people, such as local residents or first-time buyers.

Affordable housing options include:

• Help to Buy: Equity Loan: A loan to help with the cost of a new build home if you are a first-time buyer
• A home through shared ownership

Help to Buy: Equity Loan

If you are a first-time buyer, you can get an equity loan towards the cost of buying a new build home. You must be over 18, a first-time buyer, and be able to afford the fees and interest payments. You will not be able to get the loan if you have ever owned a home or residential land in the UK or abroad, or if you have had any form of sharia mortgage finance.

If you are married, in a civil partnership or cohabiting with your partner, you must make a joint application. Both applicants must meet the eligibility criteria.

The property you buy with the loan must be a new build, sold by a help to buy registered homebuilder, and be the only home you own and live in.

You will pay a minimum deposit of 5% of the property price and then arrange a repayment mortgage of at least 25% of the property price. You can then borrow an equity loan to cover between 5 to 20% of the property price.

You don’t pay interest for the first five years; in the sixth year the interest rate will be 1.75%. You can pay back the equity loan at any time but the smallest repayment you can make is 10% of the market value of your home.

Shared Ownership

When you buy a property through the shared ownership scheme, you buy a share of the property and pay rent to a landlord on the rest. The share you buy is usually between 25% and 75% but some homes allow you to buy a 10% share.

You can either pay for your share with savings or take out a mortgage. You will also need to pay a deposit which is usually between 5% and 10% of the share you are buying.

In the future, you may wish to buy more shares in your property. This is called ‘staircasing’. The more shares you buy, the less rent you will pay as this is based on the landlord’s share.

To buy a property through the shared ownership scheme, your household income must be £80,000 or less (£90,000 in London), and you are not able to afford all the deposit and mortgage payments for a property that meets your needs. As well as this, one of the following must also be true:

• You are a first-time buyer
• You used to own a home but cannot afford to buy one now
• You are forming a new household
• You are an existing shared owner and want to move
• You own a home and want to move but can’t afford a new home that meets your needs.

If you would like to discuss any points in this article further, or would like to find out more about buying a property with an equity loan or through shared ownership, please contact Spire Solicitors LLP on 01953 606351.