Are First Time Buyers missing a trick?

Halifax published research this week that points to a lack of awareness of affordable home ownership schemes that could provide a useful alternative to buying a home outright. Shared ownership and shared equity schemes both offer the ability to cut the cost of taking the first step onto the property ladder. Remarkably, almost three quarters of respondents said they would not consider buying through one of these schemes. Of those that did see the potential of these schemes, 68% didn’t know about any schemes in their area.

Shared Ownership schemes enable a proportion of the property, say half, to be purchased and rent is paid to the housing association on the other half.  The purchaser uses a mortgage and their own deposit to buy their share and as their circumstances alter they can staircase up to full ownership. Shared Equity works by allowing the buyer to purchase say 70% of the property with the other 30% provided as an equity loan.  When the property is sold of the equity loan becomes repayable then 30% of the current value would be repayable.

Shared equity has been central to many Government schemes over recent years, most recently under the Homebuy Direct banner in conjunction with housebuilders. Equity loans could really come into their own in the current market where first time buyers are struggling to come up with the large deposits required but unfortunately Government funding is drying up. Some developers do offer their own schemes on their new build property although the equity loan tends to be repayable at the end of a ten year period.

Shared Ownership and equity loans could offer a valuable leg up for some first time buyers.  Just be sure to check eligibility for the scheme, mortgage availability and understand the small print before going ahead.

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