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Ways To Buy Your Home

The vast majority of properties sold in the UK are outright purchase – full equity sales, however with property prices rising there is a growing volume of the population who can no longer afford to buy outright. There are Government funded affordable home ownership options available including Help to Buy equity loan and shared ownership. These buying options are specialist areas of lending. This means that not all the banks and building societies in the UK offer mortgages to assist you to buy therefore restricting the number of lenders that can be considered. However, the range of mortgages and products is still diverse, and you will have options.

Outright purchase

Traditionally the most common way to purchase property. Here you put down a deposit then secure a loan for the remainder. In the era of 100% mortgages, this wasn’t an issue. However, now that many lenders require a loan of at least 15-20%, this has made purchasing property outright out of the reach of most first-time buyers.

Help to Buy

Help to Buy is a government backed scheme which aims to help first time buyers onto the property market. There are two Help to Buy products: Help to Buy Equity Loans (England only), although  separate schemes are available in Wales and Scotland.

Shared equity

Offered through housing associations and housebuilders (under a wide range of different guises), shared equity is another increasingly common way to buy a home. In this instance, you own the property and there are no rental payments.

Instead you will be provided with an ‘equity loan’ providing the lion’s share of the deposit, usually up to 30% of the purchase price, some of these loans charge interest while others do not. At the point of sale, the same percentage borrowed initially is repaid to the equity loan lender based on the sale price.

Shared ownership

The Government’s New Build HomeBuy (NBHB) scheme is one of the most effective and affordable ways to get a home of your own. Here you buy a part share of a property (25% to 75%), then paid a subsidized rent on the remainder to a housing association. You can increase your share as time goes by, sometimes even up to 100%, and this is known as ‘The Government’s Shared Ownership scheme is one of the most effective and affordable ways to get a home of your own. Here you buy a part share of a property (initially between 10% to 75% of the full market value depending on affordability and when the property was built), then pay a rent on the remainder to a housing association, local authority or developer. Buying a share in the property means you will need a smaller deposit (5-10% for a mortgage) to cover the share you buy. If you wish, you can increase your share as time goes by, sometimes even up to 100%, and this is known as ‘staircasing’. A resale is where the current owner of a shared ownership property wishes to sell and is marketing the property to find a buyer.  In this situation you will buy the share or more that the seller owns and pay a rent on the remainder as with a new build shared ownership home.

Staircasing

As a leaseholder of a shared ownership property bought either new, as a resale or via social homebuy, you can, if you wish buy further shares of your property. This process is known as “Staircasing”, enabling you to own a greater proportion of your home. The greater the share you buy of your home, the less rent you pay to your landlord. If you Staircase to 100% you become an outright owner and pay no rent.

You will need to check your lease for the specific detail on when you can staircase and by how much as these differ based on the date the lease was initially granted but generally this is in 5-10% multiples.

The price you pay for the share will be determined by a Royal Institute of Chartered Surveyors (RICS) valuation which you the leaseholder will have to pay for. This valuation will determine the current full market value of your home to which the share price is determined. This could be more or less than the initial share you bought depending on the property market.

The valuation is valid for 3months, and your purchase of the share must happen within the timeframe. It is therefore worthwhile talking to one of our friendly and professional mortgage advisors before considering staircasing to review your finances and ensure together we can secure you additional mortgage borrowing if you need to.

From April 2021 as a result of the Governments Social Housing White Paper reforms new shared ownership leases will be issued to homes built with Government funding from this date. In these leases, you will be able to buy shares in your property previously, or you can buy 1% each year for the initial 15years. Your landlord will write to you each year with the price to buy this share which will be determined by the House Price Index for the relevant property type classification calculated by the Office of National Statistics and published by the Land Registry by the local authority.

Our regular mortgage health checks will benefit you when considering staircasing or other personal goals you may have.

Censeo Limited is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading name of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority for mortgages, protection insurance and general insurance products. Censeo Limited is registered in England and Wales, company registration number 06453977, the Registered Address 11b Newton Court, Pendeford Business Park, Wolverhampton, WV9 5HB.

We will charge a broker fee of up to £495, payable on application. The amount we will charge is dependent on the amount of research and administration that is required.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

The Financial Conduct Authority does not regulate all Buy to Let mortgages.

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