Home shared-ownership programme

Buying a home requires tens of thousands of pounds upfront, which makes home buying difficult for many first-time buyers. An affordable alternative may be to participate in a shared-ownership programme which is administered by a housing association.

In this programme, you buy a portion—a share—of a home and then pay rent to the association which owns the rest of the home. The share can be anywhere from 25 per cent to 75 per cent of the home. You can buy the rest of it (in stages if you wish) when you can afford to do so.

Of course, you would be buying the rest of the house at the going market rate. The advantage to this in a market with falling housing prices is that you would pay less for the remaining portion of the house.

The shared-ownership programme that is backed by the government is called HomeBuy. You would qualify if everyone in your household collectively earns less than £60,000 a year and cannot afford to purchase a home in your area.

The programme is available to first-time buyers or those who rent from a housing association or the council. It is also available to certain workers, but the qualifications differ in different parts of the country. You might qualify even if you owned a home before, as long as your household cannot afford to buy one now.

One advantage of the HomeBuy programme is that you can get a mortgage loan for up to 30 per cent of the value of the property for a low interest rate. You would pay no fees for five years. However, if you should sell the house, you would have to repay the housing association a percentage of the sale price equal to the percentage of the loan.

That is, if you took out a loan for 30 per cent of the value of the property (say £60,000 on property worth £200,000) and then sold the property for double the price, you would still pay 30 per cent of the sale price (£120,000 on a sale price of £400,000).

If you cannot afford to buy even 25 percent of a house, the Rent to HomeBuy progamme may be the way to go. You would rent a house which you wish to eventually purchase from an association for five years (or less) at 80 per cent of the normal rent. You promise to save the other 20 per cent and put it towards the cost of purchasing the home in the HomeBuy programme.

If the home cost £200,000, you would have to save a minimum of £50,000 during those five years. With that money, you would purchase 25 per cent or more of the home and enter the HomeBuy programme.

If you have rented a council home in England or Wales for at least five years, you may be able to buy your home. You will get a discount on the price that is calculated according to how long you have been a tenant, whether your house is a home or a flat and where you live. The discount makes it easier to obtain a mortgage. However, if you sell the property within five years, you will have to pay back all or some of the discount.



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