Is help to buy or shared ownership any good?

With the property prices being so high setting foot in the UK property market for first-time buyers is next to impossible. Though there are helping schemes that allow potential buyers to become owners for the first time.

Shared ownership scheme

A shared ownership initiative is a scheme that allows prospective buyers to buy a share of the property and pay rent on the rest. The new buyer with a deposit of between 5% and 10% is allowed to buy from a housing association or a developer a stake, which can vary between 25% and 75%. The shared ownership can start at 25% of the property, however many schemes require a bigger stake. The staircasing process allows the young to increase their share of the property over time. You can buy as little as a 10% share in one go. To meet the requirements of the scheme you need to be a first-time buyer, an existing owner of shared ownership property, or be unable to buy a new one.

The scheme of shared ownership allows a young person to make his or her dream come true and become a homeowner. But it has its pros and cons. The most appealing advantages of shared ownership are initial affordability and flexibility because at the beginning a young person needs only 5% deposit and a small mortgage and then just ‘staircase’. What’s more, stamp duty on the whole property can be paid in advance. The buyer also has the access to newly built houses. One of the major downsides is the need to be aware of the maintenance charges and monthly mortgage repayments. In the vast majority of cases, you won't be able to sub-let our property either, and selling your property is sometimes hard.

The ‘Help to buy’ scheme is aimed at helping new buyers to get a loan to purchase a newly built home with a deposit of 5%. This scheme is coming to an end in March 2023 and is not going to be prolonged any further. Though the Government has other schemes available for new buyers instead.

Lifetime Individual Saving Account (Lifetime ISA) allows you to buy your first property or save for a later time. To open an account, you need to be over 18 and by 40. You can save up to £4000 a year and receive a yearly bonus of up to 25% from the Government. A person can withdraw money only to buy the first property if he/she has turned 60 or is terminally ill. An unauthorised withdrawal (for any other reason except the above-mentioned) will cost you an exit penalty of 25% of the savings.

Though to be able to use this money to buy the property up to £450,000 or less certain criteria should be met: a person should be a first-time buyer, and the purchase should be made after 12 months from your first payment with a mortgage. You can also buy with someone else, your partner for example. If this is the case, you both can have separate accounts and get your bonuses, though the previous criteria should be met anyway.

First Home Scheme is primarily oriented toward members of the armed forces. The scheme is also limited to first-time buyers and certain country areas.

Primarily, all the schemes are aimed at helping prospective buyers to obtain their new homes. All of them have their pros and cons, so you need to be aware of them while choosing one of them.