Ashfords Solicitors - Could the government's new shared equity schemes help you get on to the property ladder?

Introduction

Following the announcement in the Budget, on 12th March 2008, of two new types of shared equity schemes, the residential property team at Ashfords give an overview of the schemes - shared ownership and shared equity - which the Government hopes will help more people get on to the property ladder.

Shared Ownership is a low cost way to achieve home ownership for low-income homebuyers and key workers. You buy part of your home and rent the remaining share from a Housing Association. Your initial share might be for as little as 25% and is funded by a mortgage. You pay rent on the share you do not purchase. The bigger the share you purchase, the less rent you have to pay. When you can afford to do so you can buy more shares. This is commonly referred to as staircasing. It is possible to purchase up to 100% in some schemes and own your home outright.

The combined rent and mortgage payments can still prove too expensive for low-income buyers therefore the Government introduced a range of shared equity schemes. These schemes provide access to additional money called an equity loan, which runs alongside your conventional mortgage loan.

The latest Budget introduced two new schemes MyChoiceHomeBuy and Ownhome. Both are available from the 1^st April 2008. MyChoiceHomeBuy allows a choice of lender and an initial 50% share. Interest on the equity loan, is payable immediately, at an initial 1.75%. The second new option Ownhome stipulates a minimum share of 60% and the mortgage must be provided by the Co-operative Bank. You will not have to pay interest on the equity loan for five years. Interest starts at 1.75% in year 6. With either product the provider of the equity loan is entitled to a share of any increase in the property value.

The Budget also included an announcement that stamp duty land tax will not be payable until the final 20% of the property is purchased.