Affordable housing

Help to Buy schemes, including equity loans, are only available in Wales.

It’s a government initiative which aims to help first-time buyers get onto the property ladder.

Help to Buy equity loans are available to first-time buyers purchasing a new-build property. There are regional price caps that will limit the value of the properties these can be used for.

This scheme works by the customer putting down at least 5% deposit and the government can lend the customer up to 20% of the property's value. The customer then takes out a mortgage for the remainder of the property’s value. After 5 years, the customer will start paying interest on the Help to Buy equity loan.

This scheme is no longer available to new applicants.

It was a tax-free savings account for first-time buyers. The government would contribute 25% of the customer’s savings, up to £12,000 with the maximum contribution from the government being £3,000.

Shared ownership schemes, or part rent part buy schemes, are usually offered by housing associations. Shared ownership is not currently available in Scotland.

The customer buys a share of a home, usually between 25-75%, then pays rent on the remaining share. Over time, the customer can buy more of the property and increase their share, known as ‘staircasing’.

These schemes are available to:

• First-time buyers
• Previous homeowners
• Current shared ownership homeowners who are looking to move

There are regional price caps that will limit the value of the properties these can be used for.

These schemes can help customers who are struggling to afford a property outright. They’re designed to help customers with lower incomes who are unable to pay large deposits to get onto the property ladder.

The deposit for the property can be as low as 5% of the customer’s share, rather than the total property price. The rest of the share is paid for with a mortgage with rent paid on the share owned by the housing association. The rental payments can be up to 3% of the total remaining share.

Overall, shared ownership schemes help customers to get onto the property ladder faster than buying the entirety of a home. Customers can then staircase to buy more shares in the home over time. Shared ownership can work out cheaper than renting. Customers are also able to sell their shared ownership and benefit from any increase in the value of their share.

However, you may be limited on the location of where shared ownership properties are, compared to buying a home outright. While customers have the option to increase their share of the property by ‘staircasing’, you will need to fund the additional purchase. If the value of the property increases, so will the cost of the share.

Customers are also required to pay service charges, like with other leasehold properties. Most shared ownership properties are sold on a leasehold basis, which normally means that a ground rent and/or a service charge will be payable. You should ask what these costs are before buying the property to ensure that it’s still an affordable option.

Shared equity schemes enable a customer to receive a loan, usually from the government or property developer, which contributes towards the deposit of a property. A shared equity mortgage is then used to pay for the remainder of the property.

Despite what the name suggests, when a customer takes out a shared equity loan they’ll own the entirety of the property. The name refers to the equity loan which contributes to the deposit. Customers only need to raise 5% deposit for a shared equity property but often benefit from lower monthly repayments due to the mortgage required being lower, due to the equity loan. If customers choose to put down a larger deposit, this could enable them to benefit from cheaper mortgage deals.

Shared equity schemes are not the same as shared ownership. Shared equity gives the customer ownership of the entire property. With shared ownership schemes, the customer owns a certain percentage of the home and rents the remainder.

After a set number of years, customers are usually required to start paying interest on the equity loan. And if the property is sold, the loan would need to be repaid. If the value of the property has increased, the amount you’ll need to repay may be higher than the original equity loan. Because of this, shared equity schemes can end up being more expensive than funding the deposit yourself.

The Right to Buy scheme allows tenants to buy a council property at a discounted rate.

To qualify for the Right to Buy scheme, tenants must have spent at least 3 years in any council property and have been at the most previous recent property for at least a year. Tenants can also buy the property with their partner, another tenant, or up to 3 family members who have lived in the property for at least 12 months.

The discount rate depends on the type of council property and how long the customer has lived in the council home. After the tenant has been in a council property for 3 years, they can qualify for a 35% Right to Buy discount. Every 5 years, this discount increases by 1%, with the maximum discount being 70%, which can be reached after 40 years. Rates can vary on the type of property and region.

There are several things to consider when using the Right to Buy scheme:

• If the homeowner fails to keep up with the mortgage repayments once they buy the home, it can be repossessed.
• Once the council property has been purchased, the homeowner will be required to carry out any maintenance and upkeep of the property, rather than the council.
• If a tenant buys a home through the Right to Buy scheme and sells the home within 5 years, they’ll be required to repay some or all of the discount.
• The value of the property could decrease, making it difficult for the homeowner to sell the property in future.
• Any housing benefits will stop once a person becomes a homeowner.
• Once a customer owns a council property, they cannot control whether the council demolish the building.
• The council have the right to buy back the property or force the owner to move out.