Plans to make it easier to get onto the property ladder using shared ownership revealed – here's how it works
THE minimum number of shares home buyers can purchase using the shared ownership scheme will be reduced to just 10% under new plans.
Currently, homeowners must purchase a minimum 25% before getting on the property ladder using the initiative.
The plans are part of a £12billion government programme that will see around half of new homes be available for affordable ownership.
Shared ownership lets buyers purchase a portion of the equity if they can't afford to take out a mortgage for the total value of the property.
They will still need to put down a deposit and can take out a mortgage for the part that they own, while they pay rent to the housing association that owns the remaining portion.
Homeowners can then "staircase" – buy more shares in instalments – until they own 100% of the property.
How much does it cost to staircase on your shared ownership property?
STAIRCASING is a legal process so you’ll have to fork out for more than just the value of the share you’re buying.
You’ll need to pay for a surveyor to give an up to date valuation of the property, as well as any solicitor fees.
You may have to think about stamp duty if you buy more than 80 per cent of the property. The amount depends on the value of the property.
The Chancellor recently announced a stamp duty holiday for properties worth up to £500,000 until March 2021. This means that as long as the share value you purchase is less than the cap, you won't have to pay the tax.
You may, however, have to pay fees on a new mortgage.
These can cost up to £999 depending on the deal and your circumstances.
The minimum amount you can staircase varies depending on what is outlined in the lease but is typically between 5% and 10%.
Under the new plans, the minimum shares that can be purchased when staircasing will be slashed to 1%.
It's worth bearing in mind though that the portion you buy is worth a percentage of the current property value, so you'll pay more if house prices go up.
You also have to pay legal fees and stamp duty tax – if applicable – every time you staircase, which could end up costing you more in the long run.
We previously spoke to a first-time buyer who ended up paying the tax three times after purchasing her shared ownership flat.
Revamping the scheme, which is open to all buyers who don't own another property, is part of a wider plan to get Brits on the property ladder and boost the economy.
Housing Secretary Robert Jenrick said the rest of the programme funding for England will go to social housing and other discounted rental homes.
But housing charity Shelter warned more funding was needed for "genuinely affordable" social homes in the face of the coronavirus crisis and Labour said the plans risk "further dwindling" the number of homes for social rent.
The Ministry of Housing set out the proportion of the funding, which was previously announced at the Budget, that would be targeted towards ownership.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home's value – or 40% in London – after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.
"First dibs" in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
The funding will be delivered over five years between 2021 and 2026 and is aimed at providing up to 180,000 new homes.
Mr Jenrick said: "Today's announcement represents the highest single funding commitment to affordable housing in a decade and is part of our comprehensive plans to build back better.
"Thanks to the range of flexible ownership options being made available, more families across the country will be able to realise their dreams of owning their own home, with half of these homes being made available for ownership."
The department said nearly £7.5billion in total would be delivered outside London by funding body Homes England.
A spokesman for London Mayor Sadiq Khan said £4.9 billion was required by the capital yearly to build the homes it needs while fit has only been offered £4billion for five years.
Shelter chief executive Polly Neate said: "With an unprecedented recession under way, major job losses on the horizon and a housing emergency about to spin out of control, the government must invest more in social housing than its current plans allow for.
"Social homes are designed to be genuinely affordable, which is exactly what we need right now. Discounted homeownership schemes are not."
Shadow housing secretary Thangam Debbonaire called for the government to "get a grip" on affordable housing.
"This reheated announcement of an existing budget for affordable homes will fool nobody," the Labour MP said.
The Local Government Association's housing spokesman David Renard said: "With more than one million households on council housing waiting lists, it is vital that we build more housing for social rent and we look forward to seeing more clarity around how this will be delivered."
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