PROPERTY
HOW TO GET ON THE HOUSING LADDER
THE HOUSING LADDER … WITH HOME OWNERSHIP IN THE UK AT A WHOPPING 30-YEAR LOW , IT ’ S BECOMING AS FABLED A CONCEPT AS UNICORNS OR POTS OF GOLD AT THE END OF A RAINBOW FOR SOME . DEPOSITS AND AFFORDABILITY IN GENERAL ARE DASHING MANY YOUNG – AND NOT SO YOUNG – FIRST-TIME BUYERS ’ HOPES . BUT IT ’ S NOT ALL DOOM AND GLOOM . ALTHOUGH TRADITIONAL MORTGAGE DEALS MAY NOT BE AVAILABLE TO EVERYONE THESE DAYS , THANKFULLY THERE ARE ALTERNATIVE OPTIONS OUT THERE TO HELP YOU BUY YOUR OWN SPACE . BY LISAMARIE LAMB
SHARED OWNERSHIP When you enter into a shared ownership scheme , you buy just a portion of the property and you rent the rest of it from your local housing association at a reduced rate . What makes this a particularly popular option is that , because you ’ re buying just part of the property , the deposit you need to put down isn ’ t as large as if you were buying the whole thing , thus making it more achievable . You have the option of buying the remaining shares in your home at any time , so you could end up owning the whole lot if you ’ re savvy with your spending .
Red flags : Although shared ownership sounds as though it should be a cheaper option , you ’ re paying both a rent and a mortgage , so it will cost you about the same as if you bought the place outright – it ’ s the initial costs that are cheaper , not the ongoing ones . Plus , if you do anything to increase the value of the property and haven ’ t bought all the shares by the time you want to sell , you ’ ll need to share that increase with the housing association .
SHARED EQUITY Essentially shared ownership done differently , with shared equity you take out an equity loan for the second portion of your home and then pay that loan back at the same time as paying your mortgage , which means you have total control of the property . The way it works is that the loan company has a charge on the property ; if you don ’ t pay for any reason , they can repossess your home , just like your mortgage company can .
Red flags : This is an equity loan , not a standard one , which means that you don ’ t just pay back the amount you borrowed – you pay back the percentage of equity you borrowed . So , if you borrowed 25 per cent of your home ’ s value and your property has increased , you ’ ll need to pay back 25 per cent of the new value .
HELP TO BUY Perhaps the most widely publicised scheme to help firsttime buyers get on the property ladder , Help to Buy is a government scheme , and it ’ s the government that provides you with the equity loan you need to increase your deposit . You ’ ll need at least five per cent of the property value upfront , and then the government will lend you ( through the Homes and Community Agency ) a top up of up to 20 per cent . All in all , it could mean that you only need a mortgage of 75 per cent of the property value .
Red flags : This loan is only available if you want to buy a new-build property , and once you have bought , a levy will be introduced on the loan after five years . That levy is currently 1.75 per cent , but it will rise annually . As with the shared equity scheme , any increase in the value of the property will need to be added to the initial loan if you decide to sell ( so you won ’ t realise all of the profit , if there is any ).
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