Shared Equity / Shared Ownership / HomeBuy

Shared Equity / Shared Ownership / HomeBuy

We can assist with affordable housing schemes such as shared equity, shared ownership and various Government backed schemes such as FirstBuy (previously HomeBuy Direct),HomeBuy, NewBuy and Help to Buy.

Shared Ownership

Commonly known as part buy/part rent schemes, shared ownership was designed to assist buyers who were unable to secure a mortgage to purchase a property outright. Shared ownership properties are provided through Housing Associations. You purchase a share of your home (typically between 25% and 75%) and you then pay rent on the remaining share.

You take out a mortgage to pay for the share of the property you are purchasing. You will generally still need a deposit but this may be as low as 5%. Furthermore it is 5% of the share you are purchasing. i.e. For a property valued at £200,000 with a 50% purchase (£100,000) you are looking at a £5,000 deposit (5%).

Note that many lenders will have further restrictions on new build properties and flats and could insist on a much larger deposit. However this is still based on the share you are purchasing so will still be a smaller deposit than if you were purchasing 100% of a property on the open market.

You can buy further shares in the property subject to the Housing Associations terms and conditions. This is known as staircasing. The cost of the share will depend on the value of your home at the time you choose to staircase.

Shared Equity

Unlike shared ownership, shared equity allows you to purchase 100% of the property.

Shared equity schemes are made available via the private sector and via Government funded schemes.

Private Sector Schemes will not have any taxpayer subsidy and instead a third party investor (typically a house builder) will provide a percentage steak (typically 25%) in return for an equity stake in the property. Unlike shared ownership schemes you do purchase (and own) 100% of the property. The 25% investment acts as a deposit and as a result you have the chance to access better interest rates associated with 75% mortgages. Lenders will still tend to insist on a 'personal' deposit and this tends to be a minimum 5% of the 75% value. i.e. £200k valuation, £50,000 investment from 3rd party, £150,000 to purchase but with 5% deposit (£7,500) leaves a mortgage requirement of £142,500.

These schemes tend to be run over 5 or 10 years. Some will be interest free for a period of time but some will charge interest on the 25% investment from day 1 or from year 5.

The equity stake is repaid at the end of the scheme (i.e. 10 years) or on sale of the property (whichever is sooner). The invester will receive the percentage share of the future value, whether this be more or less than when the property was originally purchased.

Government funded schemes are made available through the Homes and Communities Agency (HCA) who generally subsidise Housing Associations. Various government funded schemes have been launched over the years from 'HomeBuy Direct' back in 2009 (where government and housing developer funded a 30% equity loan) to 'Help to Buy' in 2013 (where you can buy a new-build property with a deposit of only 5% and a 20% equity loan from the government).

Am I eligible

To establish whether you are eligible for such schemes you will need to contact the HomeBuy agent in the area you intend to purchase. You can find your local 'Help to Buy' agent via the following link: https://www.helptobuy.org.uk/find-your-local-help-to-buy-agent/

Once you have confirmed eligibility, feel free to contact us and we will discuss all mortgage options available to you.

For an initial enquiry or a comprehensive financial review please email enquiries@pennymatters.co.uk or call us on 01344 988390.