More help for lower earners wanting to get on the property ladder

More help for lower earners wanting to get on the property ladder
People will be able to buy more of their own home more easily under changes to the shared ownership scheme announced last week.

Shared ownership schemes enable those on lower incomes to buy a share in a property, usually between 25% and 75%, with a housing association owning the remaining share. Rent is payable on the portion that isn’t owned. Further shares in the property can be purchased as and when the homeowner can afford to, known as ‘staircasing’.

Under current rules, shares can only be increased in 10% chunks, which can cost as much as £45,000 each time. The government plans to reduce this to 1%, making it easier for people to buy more of their property.

For example, a family in a £450,000 shared ownership four-bedroom property could buy an initial stake with a mortgage for £112,500 and pay a reduced rent on the remainder. They would then have to save up £45,000 if they wanted to buy a further 10% stake in their home. Under the new plans, they would be able to save up just 1% at a time, equivalent to £4,500.

Announcing the changes, Housing Secretary Robert Jenrick MP, said: “My mission is to increase the number of homes that are being delivered and to get more young people and families onto the housing ladder, particularly those on lower incomes.

“That’s why I am announcing radical changes to shared ownership so we can make it simpler and easier for tens of thousands trying to buy their own home.”

Longer Help to Buy mortgages

As well as announcing reforms to shared ownership, the government also said it would close a loophole that prevented those purchasing a property under the Help to Buy scheme from taking out a mortgage longer than 25 years.

Homebuyers will with immediate effect be able to take out a 35-year mortgage if they want to. Taking out a mortgage over a longer term can help reduce monthly payments, making owning a home more affordable for those on low incomes. However, although repayments may be lower with a longer-term mortgage, the amount of interest that must be paid back overall will be much higher.

You can see how changing your mortgage term could affect your monthly payments and the amount of interest you’ll pay back with our mortgage calculator.

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