In 2013, the government created a Help to Buy scheme to enable individuals to buy as little as 25% or as much as 75% of a home and pay rent on the rest.
If you cannot quite afford the mortgage on 100% of a home, then the Help to Buy: Shared Ownership scheme offered individuals the chance to buy between 25% and 75% of the home’s value and pay rent on the remaining share. It is possible to purchase bigger shares at a later date – this is known as “staircasing”.
Outside London, you can buy a home through the Help to Buy: Shared Ownership scheme if your household earns £80,000 a year or less, you are a first-time buyer, you used to own a home but can no longer afford to buy one now, or you are an existing shared owner looking to move.
With Help to Buy: Shared Ownership you can buy a newly built home or an existing one through resale programmes from housing associations. Shared Ownership properties are always leasehold.
In addition, the Home Ownership for People with Long-Term Disabilities (HOLD) scheme can help you buy any home that is being sold on a Shared Ownership basis if you have a long-term disability.
Changes from 1 April 2021
The Help to Buy: Shared Ownership scheme is being revised to allow buyers to purchase a minimum share of just 10%, making it far more accessible, and will permit “staircasing” in instalments of 1%, rather than 5% or 10% currently.
In addition, a new 10-year period will be introduced for maintenance and repairs, whereby the landlord or Housing Association will be required to cover costs rather than homeowners, allowing them to staircase more quickly.
The government has also extended the current Help to Buy: Shared Ownership scheme until the end of May to allow for delays to the construction of new house as a result of the pandemic, giving buyers more time to complete their purchases.
As well as revisions to the existing scheme, a new scheme is also being introduced from 1 April 2021 and will run until 2023.
If you are a first-time buyer, you can apply for a Help to Buy: Equity Loan. This is a loan from the government that you put towards the cost of buying a newly built home.
Outside London, you can borrow a minimum of 5% and up to a maximum of 20% of the full purchase price of a new-build home. You must buy your home from a homebuilder registered for Help to Buy: Equity Loan scheme. The amount you pay for a home depends on where in England you buy it. In the South East, the maximum property price is currently £437,600.
The equity loan, the deposit you have saved, and your repayment mortgage cover the total cost of buying your newly built home.
The percentage you borrow is based on the market value of your home when you buy it. You do not pay interest on the equity loan for the first 5 years, so you only start to pay interest in year 6.
The restriction of the scheme to first time buyers only, with the regional price caps on top, is designed to target help where it is needed most. However, buyers should bear in mind that strong demand for Help to Buy homes can mean they come with an asking price “premium”, increasing the risk of negative equity if prices fall.
Developers offering Help to Buy homes will now be required to sign up to the new Property Ombudsman, providing greater assurance of high building standards and sustainability.
If you are considering a Help to Buy home and would like any assistance with your home purchase, please contact Richard Ince at [email protected] or on 0118 958 9711.
Be Better Informed About the Property Law
Know your rights and keep up to date with changes to property law – sign up for our monthly legal newsletter.
Enter your email address below to start receiving our monthly legal bulletin.