Could a shared equity schemes help you get on to the property ladder?
Shared Ownership is a low cost way to achieve home ownership for low-income homebuyers and key workers. You buy part of your home and rent the remaining shared equity share from a Housing Association. Your initial shared equity share might be for as little as 25% and is funded by a mortgage. You pay rent on the shared equity share you do not purchase. The bigger the shared equity share you purchase, the less rent you have to pay. When you can afford to do so you can buy more shared equity shares. This is commonly referred to as staircasing. It is possible to purchase up to 100% in some schemes and own your home outright.
Because the combined rent and mortgage payments can still prove too expensive for low-income buyers the Government introduced a range of shared equity schemes. These shared equity schemes provide access to additional money called a shared equity loan, which runs alongside your conventional mortgage loan.
The 2008 Budget introduced two new schemes MyChoiceHomeBuy and Ownhome. Both are available from the 1st April 2008. MyChoiceHomeBuy allows a choice of lender and an initial 50% shared equity share. Interest on the equity loan, is payable immediately, at an initial 1.75%. The second new option Ownhome stipulates a minimum shared equity share of 60% and the mortgage must be provided by the Co-operative Bank. You will not have to pay interest on the shared equity loan for five years. Interest starts at 1.75% in year 6. With either product the provider of the shared equity loan is entitled to a share of any increase in the property value.
The Budget also included an announcement that stamp duty land tax will not be payable until the final 20% of the shared equity of the property is purchased.