Help to Buy Versus Shared Ownership

Help to Buy has offered a fantastic opportunity to buyers to enable that first step onto the housing ladder.  Started in 2013, it offers home buyers with a 5% deposit a 5-year interest free government loan of up to 20% of the purchase price of a new build property. However, with the scheme set to end in 2023, is there an alternative for these new buyers? Help to Buy has now ended.

Shared Ownership is one option to consider instead of Help to Buy. This allows earners with less than £80,000 per year in income (£90,000 in London) the opportunity to purchase a share of a home (usually between 25 and 75 per cent) from a housing association and pay rent on the rest.

Compared to Help to Buy where you need a minimum deposit of 5% of the entire property cost, with Shared Ownership you only need a deposit for the share of the property that you are buying.

For example, a property with a purchase price of £200,000:

• Help to Buy – Requires a 5% deposit of £10,000
• Shared Ownership – Requires a 5% deposit of £2,500 for a 25% share

There is the opportunity to increase your share of the home in increments of 10% which reduces the rent payable, but this involves additional costs of legal fees, valuation fees and mortgage fees.

In both cases there are costs to be considered – rent to be paid on the remaining share of a shared ownership property as well as the consideration of service charges associated with leasehold properties (all shared ownership properties are leasehold) and the mortgage on the remaining value of your slice of the property. With Help to Buy, as well as the mortgage payments, interest will be payable on the government loan after five years and the original lump sum will need to be repaid at the end of the term.

Ultimately, both options offer an opportunity to get onto the housing ladder and shared ownership is a great option for those with a smaller deposit.