25.02.2016

Help-to-buy schemes are not a new idea, but significant changes are being made from April this year that mean more people could benefit.

If you’re wondering if you’ll ever be able to afford your own home, or take that all important first step to becoming a home owner, it could be worth considering.

We’ve put together this quick reference guide setting out what they are, and who they are aimed at, to help you decide whether it could be for you.

What are help-to-buy schemes?

Help-to-buy schemes are government-backed incentives to help those with lower household incomes who can’t afford to buy their own home.

There are a few options available. These are:

• Shared Ownership
• Equity Loans
• Mortgage Guarantees

There are also schemes for council and housing association tenants and you can read the guides on Right to Buy and Right to Acquire.

The biggest changes are happening with the shared ownership scheme, so this is the focus of our article. Here’s how it works.

Shared ownership schemes

Shared ownership schemes enable you to buy a share of your home (between 25% and 75% of the property value) and then pay rent on the remaining share. You need to fund the purchase of your share of the house through your savings, or take out a mortgage. The amount you pay will be calculated to cover your share of the property purchase price.

At the moment, a shared ownership help-to-buy scheme is available across England if your household earns £60,000 a year or less (or in London, £66,000 a year for a one or two bedroom property or £80,000 for properties of three bedrooms or more).

From April 2016, however, the earnings threshold is changing so anyone with an income of less than £80,000 outside of London can apply (£90,000 inside London).

It is hoped that this will provide a boost for people who currently struggle to get on to the housing ladder, especially first-time buyers who find it difficult to save the large deposits that are often required to buy a property in the traditional way.

This is not only for first-time buyers, however. Former home-owners who can no longer afford to get back into the property market can also apply. Priority is usually given to people who currently rent a council or housing association property and Armed Forces personnel.

Local Authorities may offer variances on the scheme based on the needs of the local community. This can cover people who live and work in the area, people with disabilities and older people. More information can be obtained from your local help to buy agent to check eligibility.

Buying a greater share in your home

If you want to buy a greater share in your home at any point, it’s possible to do this through a process called ‘staircasing’.

The cost of the share will depend on how much your home is worth when you decide to buy, so it could go up or down in price depending on house values at the time. Your property will be valued by the housing association to determine this.

Selling your home

To sell your home you need to own it outright. The housing association also retains the right for 21 years after you fully own the home to buy it back if you decide to sell.

You can find out further information about shared ownership here along with examples of how the equity loan and mortgage guarantee schemes work.