PROPERTY
HOW TO GET ON THE HOUSING LADDER
THE HOUSING LADDER … WITH HOME OWNERSHIP IN THE UK AT A WHOPPING 30-YEAR LOW, IT’ S BECOMING AS FABLED A CONCEPT AS UNICORNS OR POTS OF GOLD AT THE END OF A RAINBOW FOR SOME. DEPOSITS AND AFFORDABILITY IN GENERAL ARE DASHING MANY YOUNG – AND NOT SO YOUNG – FIRST-TIME BUYERS’ HOPES. BUT IT’ S NOT ALL DOOM AND GLOOM. ALTHOUGH TRADITIONAL MORTGAGE DEALS MAY NOT BE AVAILABLE TO EVERYONE THESE DAYS, THANKFULLY THERE ARE ALTERNATIVE OPTIONS OUT THERE TO HELP YOU BUY YOUR OWN SPACE. BY LISAMARIE LAMB
SHARED OWNERSHIP When you enter into a shared ownership scheme, you buy just a portion of the property and you rent the rest of it from your local housing association at a reduced rate. What makes this a particularly popular option is that, because you’ re buying just part of the property, the deposit you need to put down isn’ t as large as if you were buying the whole thing, thus making it more achievable. You have the option of buying the remaining shares in your home at any time, so you could end up owning the whole lot if you’ re savvy with your spending.
Red flags: Although shared ownership sounds as though it should be a cheaper option, you’ re paying both a rent and a mortgage, so it will cost you about the same as if you bought the place outright – it’ s the initial costs that are cheaper, not the ongoing ones. Plus, if you do anything to increase the value of the property and haven’ t bought all the shares by the time you want to sell, you’ ll need to share that increase with the housing association.
SHARED EQUITY Essentially shared ownership done differently, with shared equity you take out an equity loan for the second portion of your home and then pay that loan back at the same time as paying your mortgage, which means you have total control of the property. The way it works is that the loan company has a charge on the property; if you don’ t pay for any reason, they can repossess your home, just like your mortgage company can.
Red flags: This is an equity loan, not a standard one, which means that you don’ t just pay back the amount you borrowed – you pay back the percentage of equity you borrowed. So, if you borrowed 25 per cent of your home’ s value and your property has increased, you’ ll need to pay back 25 per cent of the new value.
HELP TO BUY Perhaps the most widely publicised scheme to help firsttime buyers get on the property ladder, Help to Buy is a government scheme, and it’ s the government that provides you with the equity loan you need to increase your deposit. You’ ll need at least five per cent of the property value upfront, and then the government will lend you( through the Homes and Community Agency) a top up of up to 20 per cent. All in all, it could mean that you only need a mortgage of 75 per cent of the property value.
Red flags: This loan is only available if you want to buy a new-build property, and once you have bought, a levy will be introduced on the loan after five years. That levy is currently 1.75 per cent, but it will rise annually. As with the shared equity scheme, any increase in the value of the property will need to be added to the initial loan if you decide to sell( so you won’ t realise all of the profit, if there is any).
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