FIRST-time buyers will be able to get on the property ladder with just a £2,000 deposit under new shared ownership rules.
The scheme let’s buyers purchase a portion of shares in the property while the housing association owns the rest.
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It helps potential property owners buy a home by lowering the mortgage. Owners pay rent on the share that they don’t own.
Currently, the minimum shares buyers can purchase is 25 per cent, but under new rules it will be lowered to just 10 per cent.
Changes to the scheme were announced last month at the Conservative Party conference by housing secretary Robert Jenrick but the Ministry of Housing, Communities & Local Government confirmed the measures yesterday.
The department claims that buyers in some areas where house prices are cheaper will only need a deposit of £2,000.
How to save £2,000 using the Help to Buy Isa
YOU can save £2,000 quicker using a Help to Buy Isa. This is a savings account that’s offered by many high street banks.
It’s a government backed scheme that will see your savings topped up by 25 per cent if you use the money to buy your first home.
That means if you save £1,800 in the account, you’ll get an extra £200 for free.
You can open an account with £1,200 but after that the maximum you can pay in is £200 a month.
That means, the fastest you could save £2,000 in is three months.
You should read our guide to Help To Buy Isas for more information on how they work, how long you have to open an account and which banks offer the best rates.
For example, a 25 per cent share of a £200,000 property is £50,000, so buyers will need £5,000 for a 10 per cent deposit.
They’d need to take out a mortgage worth £45,000 to cover the rest of their share.
But when the new Right to Shared Ownership rules kick in, tenants buying the minimum 10 per cent share worth £20,000 would need just a £2,000 deposit.
They’d only need to secure a £18,000 mortgage to cover the rest of the costs.
The regulation changes will also allow owners to staircase – the process of buying more shares – in increments of just one per cent compared to a minimum of 10 per cent now.
Such a small amount of shares mean that people are less likely to need a bigger mortgage, instead they can increase their share simply with savings.
The changes hope to give thousands of social tenants an opportunity to buy a stake in their home.
The government promised will also “cut the fees charged” to staircase such as legal fees, surveys, mortgage fees and stamp duty.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
Buyers are currently expected to pay stamp duty on any extra portion of shares they buy because they’re no longer considered first-time buyers and therefore not entitled to the relief.
We previously spoke to first-time buyer Sian Melonie who was hit by this issue and who ended up paying stamp duty three times on her shared ownership property.
The new rules will only automatically apply to new housing association properties.
Housing associations will have to voluntarily sign up to the scheme to help existing housing association tenants.
The department has also promised to “make it even easier” to sell shared ownership homes, which can often be held back by the housing association’s “right of first refusal”.
It means that it has first dibs on purchasing the home, which means it could sell for less than if it was sold on the open market.
It has not been specific about how it will achieve this, nor has the government announced when these rules are set to come in to force.
Mr Jenrick said: “Owning a home is not just about the four walls around you, it’s about investing in your family, saving for the future and putting down roots in a community.
“These measures will mean more people, including residents living in new housing association homes, are given the opportunity to get on to the housing ladder.”
