The right to buy scheme is designed to help tenants of local councils and housing associations get onto the property ladder by buying the home they currently rent. Usually available to those who have been tenants for more than one year and in some circumstances, more than five years. The scheme offers a discount from the property value, allowing you, the tenant to buy it at a genuine discounted rate.
The level of discount varies according to how long you have been a council tenant, the type of property and the area in which you live. The discount you receive can in effect act as the deposit for the purchase, meaning that you have find less or no deposit from your own savings to make the purchase. And the balance of monies to be paid to the council or housing association for the purchase is paid from your mortgage lender.
Equity loans are only available in England, and are open to people buying new-build properties. If you have a 5% deposit available, the government will top up your deposit with an equity loan of up to 20% of the property value. No interest is charged on the loan for the first five years, after which a percentage fee is charged each year. You can either repay the loan in stages (in minimum 10% increments) at any time, or pay it off when you sell the property.
Shared ownership schemes have existed in various forms for years, and under the current Help to Buy scheme are available to most first time buyers with a household income under £60,000. Shared ownership allows you to take out a mortgage for a percentage of the property (between 25% and 75%) and pay rent to the housing association for the remaining portion of the property, which they own. Alternative schemes are available for people over 55 or who have long-term disabilities.
The various Help to Buy schemes represent a real step forward in promoting affordable home ownership, however each of the schemes has different qualifying criteria and it’s a good idea to speak to an adviser or mortgage broker to help you understand the ins and outs.