Now, to coincide with Shared Ownership Week, a property expert has translated some of the complex terminology in a bid to help potential first-time buyers find the most suitable route to homeownership.
Craig Osborne, director at Site Sales Property Group said it had never been more vital to communicate the different options available to those trying to get on to the housing ladder.
“Too many Londoners think they can afford to rent not to buy,” he said, “many shared ownerships schemes turn that notion on its head.”
And he thinks the jargon which often surrounds shared ownership, which is where people can buy a proportion of a property and pay rent for the rest, can prove baffling.
He said: “Knowing which scheme is best for you can be a challenge and once you’ve found your best option, the sales process can be filled with confusing terminology.
“The Government and housing associations haven’t purposely tried to make the buying process confusing but for home buyers it can add an unnecessary layer of complexity.
“Knowing your way around the different schemes should allow you to make the most of the opportunities available to help you onto the property ladder and buy your new home.”
Help to Buy equity loan
With a Help to Buy equity loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.
You won’t be charged loan fees on the 20% loan for the first five years of owning your home. Help to Buy allows first-time buyers get onto the housing ladder a lot sooner than they may otherwise have been able to.
Help to Buy ISA
If you’re saving to buy your first home, the Government will top up your savings by 25% (up to £3,000) and if you’re buying with someone else, they can also get a Help to Buy ISA. This is a great way for people to raise the funds a little quicker for their first deposit.
Shared Ownership
You start by buying a share of a property – usually between 25% and 75% – with a mortgage. The rest is owned by a housing association to whom you pay rent.
Basically, you buy a bit and you rent a bit. The scheme is aimed at families or individuals unable to purchase a suitable home on the open market. Your maximum income must not exceed £80,000 outside of London and £90,000 inside London per annum.
There is a common misconception about shared ownership that these properties are inferior. This is untrue. These homes come with a good specification and are built to the same high standards as any new build property.
There are some restrictions on these schemes and unfortunately, there is not a ‘one size fits all’ option for those looking to buy their first home. To find out more about the schemes available and the restrictions, visit https://www.helptobuy.gov.uk/
Jargon Buster – some terms you might come across
Part-rent, part-buy – This is another way to describe Shared Ownership.
Market Value – Refers to the total value of your property should you buy it outright. This figure is used to calculate the value of your share when buying through Shared Ownership.
IFA – IFA or independent financial adviser is a person or a company that can advise on a large range of mortgage products.
Staircasing – After an agreed amount of time, you can purchase a larger share of your home, the greater the share you own, the less rent you will have to pay.
Conveyancing – A term used to describe the process, conducted by a legal professional, of the preparation of documents linked to the buying and selling of a property.
Service Charge – Residents of a development pay this as a charge for the upkeep of communal areas such as gardens and hallways.
Completion – The point at which the buyer becomes the legal owner of the property. Legal completion is handled by the solicitors of both the buyer and seller.
Stamp Duty – A Government tax that you pay on completion.
Shared Ownership week runs from 20th to 26th September.
