Thanks to a number of helpful initiatives, owning a property in London is currently more accessible than it has been in a long time. UK Finance has even stated that the number of first-time buyers in the capital has reached the highest level in three years.
Launched in 2013, the Help to Buy scheme has helped more than 420,000 people get on to the property ladder across the UK by making owning a first home more affordable for those opting in.
However, it’s not the only option to bring that first property within reach. Shared ownership schemes are also becoming increasingly popular. So much so that many would-be buyers are trying their best to figure out which option will be right for them.
You can only choose one route – Help to Buy or Shared Ownership – so it’s important to establish which one will work better for you. We hope our guide below will be a helpful start.
How does Help to Buy work in London?
The national Help To Buy: Equity Loan scheme involves the government lending you up to 20% of the cost of your new home, so you only need a 5% cash deposit and a 75% mortgage to make up the rest. In 2016, the Government increased the Help to Buy scheme’s upper loan limit from 20% – 40% for all buyers in London boroughs. This was great news for Londoners eligible for the scheme.
Since then, London buyers have only needed a 5% deposit to secure a home of upto £600,000. Up to 40% of the property value has been provided by an equity loan from the Government and the rest will be made up of a mortgage of up to 55% from a bank or building society.
However, the current scheme is set to end by 2023 and from April 2021, the Government is restricting the initiative to first-time buyers, so anyone wanting to take part in the scheme will need to act fast if they don’t want to miss out.
If you think Help To Buy could be for you, use our Help to Buy calculator to find out how it works and how much the scheme could help you. You can also visit the London Help to Buy scheme which is run by the Government-appointed Help to Buy London agent.
Is Help to Buy for you? Yes – if you want to own your own home in its entirety and will be able to afford the costs involved with the loan scheme.
Would shared ownership suit you better?
Also Government-backed, the Shared Ownership ‘part buy/part rent’ scheme is similarly designed to help people take that first step onto the property ladder. Properties sold through the scheme make it possible to purchase shares from 25% up to a maximum of 75% of the initial purchase.
The scheme is designed to help buyers to purchase the maximum that they can afford, based on their income and current savings. The remainder of the property is paid for by paying a discounted rent to the landlord on the share you don’t own as well as a contribution towards the service charge.
The correct ratios can be calculated with the help of your mortgage adviser who will be able to recommend the best purchase percentage for you.
Benefits of the scheme include buyers being able to purchase more shares of their property in the future when they are financially able. There is also no stamp duty to be paid when purchasing a Shared Ownership property which is valued up to £500,000.
To be eligible for the scheme, you must not currently own another property or land, whether that’s in the UK or abroad. Your maximum household income must also not exceed £90,000 per annum. For buyers wanting a thorough overview of the current initiative, MoneySupermarket has an up to date, useful guide to all things Shared Ownership, which is well worth a read.
Is Shared Ownership for you? Yes – if you don’t mind not completely owning your home right away, and are looking for a first step out of the rental market with a property of your dreams.
Looking for a London property offering Help To Buy and Shared Ownership?
Then look no further than Leon House. Located in the heart of Croydon this redevelopment is perfect for those who are keen to start house hunting but are still unsure which option they want to go for. Both options are available for buyers of the one and two bedroom apartments.
Of course, before you do settle on the option for you, do some thorough research to ensure you’re making the right choice. The Money Advice Service has some great independent Help To Buy advice and an overview of Shared Ownership too.
Fancy a look around at what you could afford to buy with either scheme? Book an appointment to take a look around at Croydon’s Leon House.