Government schemes - New-Build HomeBuy Shared Ownership
The government’s New-Build HomeBuy Shared Ownership scheme can be of significant help to you if you cannot afford to purchase a home on the open market. In this article, we will tell you all you need to know about the scheme, the eligibility criteria, and important aspects to consider before you apply for the scheme.
Fundamentals of Resale HomeBuy Shared Ownership scheme
Through this scheme, you will be able to buy a new-build home, either entirely or by arranging a mortgage to buy a portion and paying the rent on the remaining property. The rent is charged below market-rates.
Once you are settled in, you can begin slowly buying more of the property. As you buy up more portion of the property, the rent you have to pay will get reduced. You may also be able to buy 100% of the property. However, you will have to check with the housing association, which is offering the new-build home.
This scheme is for you if you are not being lent enough money or cannot afford a large deposit to buy the entire property.
How does the scheme work?
You will be buying a share in a new-build property. Typically, this can be between 25% and 50%; in occasional cases, it is up to 75%). To purchase this share, you can secure a mortgage. There are also specific mortgage products for shared ownership properties.
Further, you have to put down a deposit on the mortgage. It can between 5% and 15% of the value of the property. The exact percentage will depend on your mortgage lender’s policy and your financial situation.
You will also have to pay rent on the portion you did not purchase. The rent will is charged at 15%-20% below market-rates.
Once you are moved in, you can start planning on buying more of the home. You can do this through “staircasing”. However, you should note that you will incur valuation fees, legal costs, conveyancing cost, and stamp duty each time you buy more share, amongst other expenses.
If you want to sell your share in the property, and sometimes even in cases where you may own 100% of the property, you will have to let the housing association know that you want to sell. If the housing association fails to find a buyer within a certain period, then you can sell your share yourself.
Are you eligible for New-Build HomeBuy Shared Ownership scheme?
- Your household income should be less than £80,000. If you want to buy a property in London, your household income should be less than £90,000.
- You will have to show that you have sufficient funds to pay for the deposit, legal fees, stamp duty and the other costs associated with moving.
- You can afford to own the home in the future.
- You are a first-time buyer or used to own property but don’t anymore.
- You will require a good credit history. If you have a bad credit rating,
- check out our article on mortgages for people with bad credit.
There are further eligibility criteria, and they will differ from one housing association to another.
Is HomeBuy Shared Ownership scheme for you?
- It is likely to make more sense if you stay in the property in the long term. New-built properties have extra premiums on the sale price, which deprecates as soon as you move in. If you sell too soon, you will undoubtedly be selling at a loss.
- You need to make sure that you can keep up with the monthly mortgage repayments simultaneously as rent prices increase, though they will still be below the market-rates.
- In addition to rent, you will also be charged service charges. This will be mentioned in your lease. The lease will also detail your further rights and responsibilities.
- You should plan ahead when you want to start staircasing and plan for the expenses you will incur when you make each payment.
- You cannot sublet under the scheme so if you have to relocate due to work or any other reason, you can either buy the entire property or sell your share in it.
How to apply for New-Build HomeBuy Shared Ownership scheme?
- Register with the local HomeBuy Agent.
- Choose a property from those offered by the housing association in your chosen area on the HomeBuy Agent’s website.
- Call up the number on the advert and ask for eligibility criteria.
- You will have to pay a reservation fee to reserve a property.
Click here if you want to learn about other affordable home ownership government schemes.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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