6 affordable homeownership schemes you should know about

Saving up money for your own home can seem daunting. The good news is there are a few options that may help you get onto the property ladder sooner than you expected. Recently, the government added other measures to their collection of affordable homeownership schemes. We’re taking a look at the pros and cons of each one, as well as the eligibility and requirements: 

First Homes Scheme

The First Homes scheme, launched on the 4th June 2021, gives first-time buyers a 30% discount towards a new-build property in England. The scheme is designed to help key workers such as NHS staff and teachers, as well as people who have a local connection to the area.

A discount of 50% is available to areas where properties are more expensive. No matter what the discount rate, this discount is passed down to future purchasers if or when the house goes up for sale. 

One aspect of the First Homes scheme to remember is that it has a price cap. First-time buyers need to ensure their home costs less than £250,000 once the discount has been applied (or £420,000 in London).

Requirements:

  • First-time buyer
  • Combined income of less than £80,000 (£90,000 in London)
  • Able to put down a minimum deposit of 5%
  • Initial sale price must be £250,000 or lower once the discount has been applied (

It’s important to note that this is a list of general requirements. Local councils may have their own requirements such as making the scheme available only to local people or key workers or setting a lower price cap. 

More information on the First Homes Scheme can be found here.

Lifetime ISA (LISA)

Even though it’s not possible to open a Help to Buy ISA anymore, the Lifetime Individual Savings Account (LISA) is still very much available. The account is useful for those of you looking to save up for a deposit for your own home. 

A LISA can be used to buy your first home or to save money aside for later life. You can put in up to £4,000 a year tax-free, but you must make the first payment into the account before you’re 40 years old. 

So what’s the difference between a regular ISA and a LISA? The government will add 25% to your savings, up to a maximum of £1,000 per year if you’re using the LISA to buy your first home. 

However, it’s really important to know that you will pay a penalty of 25% of anything you withdraw before the age of 60 or if you don’t use the money to purchase your own home (after a minimum of 12 months). 

Requirements:

  • Buying with a mortgage
  • Applicant must be at least 18 years old
  • Must open an account before you’re 40 years old
  • The property costs £450,000 or less
  • Instruct a conveyancer
  • Buy the property at least 12 months after you make your first payment into the LISA
  • Aged 18 or over
  • Looking to buy a new-build property
  • First-time buyer
  • Property is sold by a registered Help to Buy homebuilder 
  • Be able to pay a minimum deposit of 5% 
  • Be able to set up a repayment mortgage of at least 25% of the property purchase price

Help to Buy Equity Loan

A Help to Buy Equity Loan can be used by first-time buyers to buy a new-build home in the UK. You need to pay a minimum of a 5% deposit on the home and must take out a mortgage of at least 25% of the property purchase price. 

After this, you can borrow a Help to Buy Equity Loan to cover between 5% and 20% of the property purchase price (up to 40% for London). It’s important to bear in mind that the amount you borrow is also subject to interest payments. You don’t pay interest for the first five years of the loan contract, but from the sixth year onwards you’ll need to pay a monthly interest of 1.75% on top of the loan repayments. The minimum loan repayments you can make is 10% of the market value of your home. You also need to pay a management fee of £1 per month until you pay off the loan. 

If you’re looking to get a Help to Buy Equity Loan, it’s a good idea to know the maximum property price limits for each region:

Region Maximum property purchase price
North West £224,400
North East £186,100
Yorkshire and the Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
South East £437,600
South West £349,000
London £600,000

 

Requirements:

  • Aged 18 or over
  • First-time buyer
  • Be able to afford interest payments and fees
  • Must be a new-build property sold by an official Help to Buy homebuilder
  • Must be the only home you live in
  • Never owned a property or residential land in the UK or overseas
  • Never had any type of sharia mortgage finance

More information on Help to Buy is available here

Mortgage guarantee scheme

If you’re looking to fully own your home but you’re struggling to save for a deposit, the Mortgage Guarantee Scheme could be an option. But how does it work? Lenders who are part of the scheme purchase a guarantee on mortgages with a 5% deposit. This way, the lenders are compensated in the event of repossession, but homebuyers get to pay a lower deposit from the outset. All homebuyers using the Mortgage Guarantee Scheme will still need to pass all the usual credit checks and affordability checks. 

Requirements:

  • Existing and first-time buyers can apply
  • New build and old properties
  • Property must cost less than £600,000
  • Must have a regular income
  • Good credit rating
  • Be able to afford monthly mortgage repayments

More information on the Mortgage Guarantee Scheme can be found here

Buying a home through shared ownership

Shared ownership schemes allow you to buy a share in a home valued between 10% and 75% of the property’s full market value, though the usual minimum share is 25%. You’ll pay rent on the remaining share and, usually, a ground rent and service charge. 

You can buy your share with a mortgage or with cash savings, though you still need to pay a deposit of around 5% to 10% in the value of the property. You can also buy more shares in your home (a term called “staircasing”). Simply put, the more shares you buy, the less you’ll need to pay in rent. 

Requirements:

  • Annual household income of £80,000 or less (£90,000 in London)
  • Be one of the following: 
    • First-time buyer of a new-build
    • Someone who has already owned a home in the past 
    • Existing shared homeowners looking to move to another property 
    • People looking to buy a home that meets their everyday needs (e.g. if you live with a disability)

Buy your council house with Right to Buy 

Right to Buy is an initiative where tenants can buy their council-owned property at a discounted price. The scheme is also available to people who live in properties that were sold by the council to another public landlord, such as a housing association. This is called ‘Preserved Right to Buy.’ If you started living in your home after the council sold it to a public landlord, you may still be able to purchase the property under the Voluntary Right to Buy scheme. 

Take the government’s Eligibility Quiz to see if Right to Buy is right for you.

Requirements:

  • The property is self-contained
  • Secure tenancy (you live in the property long-term, usually for your lifetime)
  • The property is your only home or main home
  • You have a public sector landlord such as a housing association, council or NHS trust for a total of three years (it doesn’t have to be three years in a row)

Ready to get onto the property ladder? Find out how much you can expect to pay in conveyancing fees if you’re looking to buy your own home: 

Use the Conveyancing Calculator