A look at 'Help to Buy' and 'Shared ownership'.

Thinking of buying a new build home, wondering if it’s affordable? ‘Help to buy’ and ‘Shared ownership’ maybe the answer.

There are many benefits in buying a new build home – exciting, contemporary design and layouts ideal for modern living. Energy efficiency and low maintenance reduce costs. And there’s the bonus of a fast, straight forward buying process, with no chain. 

Here are the key facts for you. When you’re ready, click here for our current new build listings, and get in touch to reserve the place for you…

Help to Buy

The current Help to Buy Equity Loan is open to many buyers seeking a newly built home in England. It is not just for first-time buyers, but this ends on the 15th of December, with legal completion of your home purchase required by 31st March 2021.

With the current demand, we highly recommend you reserve the place for you as soon as possible, to be sure there is enough time to process your purchase under the current Help to Buy scheme.


From 1st April 2021, only first-time buyers will be eligible to use the Help to Buy scheme and regional price caps will be put in place. For homes in Bristol Help to Buy will only be available on properties up to £349,000. The good news is you can reserve property from 16th December 2020. 

As an appointed agent for Help to Buy, we do need to make sure all applicants meet the eligibility criteria for the scheme.

To apply for a Help to Buy Equity Loan you must:

  • Have a deposit with a minimum value of 5% of the full purchase price of the property

  • Arrange a repayment mortgage valued at between 25% and 75% of the full market value of the home (up to 55% in London)

  • Reserve a newly built home, being purchased from a registered Help to Buy property developer, currently up to the value of £600,000

  • Be able to provide evidence that you can afford the repayments on the equity loan and all other outgoings

At the time you buy your new home with a Help to Buy Equity Loan you must not:

  • Own any other residential property, or have your name attached to the deeds of another residential property, in the UK or abroad. The home purchase through an equity loan must be the only home you will own. 

Married couples are considered as owning assets (such as property) jointly and therefore if one owns a property, the other is directly linked to it and is treated as a homeowner.

You will be expected to sell your current home (in the UK or abroad) if moving. 

The scheme is not available to assist buy-to-let investors or to own land with planning permission to build residential properties. You must not:

  • Sub-let or rent the property out after you buy it, without written consent to do so.

  • Have a financial interest in any other residential property, even if you do not live there.

If you make a fraudulent claim for a Help to Buy Equity Loan you may be liable to criminal prosecution. You will also have to pay back the loan immediately.

Affordability checks - we will carry out an initial eligibility and sustainability assessment. This helps to determine how much you can reasonably afford based on your outgoings. 

It’s important that you can keep up with repayments over the longer-term. Your home may be at risk if you do not keep up the repayments on your mortgage or other loans secured against it.

Help to Buy provide a calculator and guidance for eligibility. Further affordability checks can be carried out by your financial advisor. Our mortgage advisors are completely independent and their services are FREE, speak to our in-house team today!

Shared ownership

Generally, schemes allow buyers with a deposit of 5-10% to purchase a stake of up to 40% in a property from a housing association and pay rent on the remainder. Subject to the property being a ‘section 106’ or ‘open market shared ownership unit’ a stake from 40% up to 75% may be purchased.

Buyers can increase their share over time using a process called 'Staircasing'. If you staircase, you’ll usually need to buy at least another 10% each time, you will have to pay for a market valuation, and you may be subject to further stamp duty payments.

To use shared ownership, you’ll need to have a household income of less than £80,000 (or £90,000 in London). You’ll also need to be a first-time buyer, existing shared ownership homeowner, or someone who has previously owned a home but can’t afford to buy one now. Shared ownership homes are leasehold, meaning you’ll need to pay a service charge for the maintenance of any communal areas.

Here are some further considerations - 

Advantages
Disadvantages

Initial affordability: you can buy a share of a home with a 5% deposit and a small mortgage.
 

Service charges: you’ll need to pay service charges for the upkeep of common areas and, while you might only own 40% of the home, that won’t be reflected in how much you have to pay in charges.

Additional costs: you can either pay stamp duty on the full property value upfront (useful if you plan to reach 100% ownership and are worried about the value increasing) or choose to pay it just for your share. This means if you’re spending less than £125,000 initially you won’t need to pay a lump sum upfront – though you may have to pay a small amount on the rented part of the home.

Leasehold issues: unlike other leasehold properties, you won’t be able to invoke your Right to Manage, which enables homeowners to take over the management of the block if they’re unhappy with how it’s being maintained. You also won’t be able to buy the freehold until you own 100% of the property.

New homes in good locations: while there are plenty of resale shared ownership properties about, many are new-builds in sought-after locations. New-build homes come with warranties against build defects, and you should benefit from lower energy bills.

Letting: if your circumstances change and you want to let the property out, you won’t be able to without the permission of the housing association.

Flexibility: If your circumstances change and you come into some money, you can ‘staircase’ up to full ownership. Remember that you’ll need to get a valuation and buy additional shares at the current market rate.

Cost of increasing share: you’ll need a significant lump sum if you wish to staircase, as the minimum share you can usually buy through this process is 10%. You’ll also need to pay stamp duty on any additional shares.

Can sometimes be sold on your behalf: when selling a shared ownership home you have to start by informing the housing association, who will attempt to find a buyer before it’s put on the open market.

Rent costs: the costs of rent on the housing association’s share can be steep. You can be charged rent of up to 3% of the association’s share each year.

Good for local buyers: many shared ownership schemes offer preferential treatment to buyers who already live in the borough where the homes are located – potentially giving you a chance of beating the competition.

Borrowing: not all mortgages allow shared ownership purchases, so you’ll need to shop around – and you could end up paying a higher interest rate than if you were borrowing on an existing property


Useful links - 
https://www.helptobuy.gov.uk/equity-loan/help-to-buy-equity-loan-2021-2023/
https://www.helptobuy.gov.uk/shared-ownership/

https://www.which.co.uk/news/2018/09/is-shared-ownership-a-good-idea-for-first-time-buyers/
https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/shared-ownership-what-to-watch-out-for/

If you have any questions or queries a member of our new homes team will be only too happy help, feel free to email directly newhomes@oceanhome.co.uk to arrange a one-to-one chat.

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