Shared Ownership vs Help to Buy Equity Loan

Posted: Tuesday November 28, 2017

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Shared Ownership and the Help to Buy equity loan are two government schemes under the ‘Help to Buy’ umbrella which have been created to help people get onto the property ladder and buy their first, newly built home. But what is the difference between them and which one is right for you? 

Shared Ownership

Shared Ownership is a scheme which has been created to help those who cannot afford 100% of a mortgage on a property. You buy a percentage of a property, between 25% and 75%, and you only pay for a mortgage on the percentage of the property that you purchase. You then pay rent on the remainder of the property which is subsidised according to the percentage of the property that you own. Over time, you can increase the percentage of the property that you own, until you eventually own and pay a mortgage on the entire home.

Help to Buy Equity Loan

The Help to Buy Equity Loan is a scheme where you can borrow up to 20% of the cost of your new build property from the Government. You just need to save a 5% deposit, and then you take out a mortgage on the remaining 75% of the home. 

For the first 5 years of owning the property, you do not have to pay any fees on the 20% loan from the Government.

Advantages of Shared Ownership

  •       You don’t need to save a large deposit.
  •       Shared Ownership can work out cheaper for you than simply renting a property, as well as you working towards owning the property.  
  •       As your circumstances change, you can decide whether you want to purchase the rest of the property or not. You are not tied to purchasing the rest of the house. 

Advantages of Help to Buy Equity Loan

  •       You can get access to cheaper mortgage rates because you only have to mortgage 75% of the property.
  •       You don’t need a large deposit at 5% rather than the usual 10% that is required by mortgage lenders.
  •       You don’t have to pay any interest on your Government loan for the first 5 years. 

So, which is right for you?

Both of these schemes have their advantages. It is very important to do your research as thoroughly as possible with both the Help to Buy and Shared Ownership schemes. Compare both of them as possibilities using a property value that you are considering. Make sure you include estimates of all of the extra costs that you will incur with both schemes. Do your research so that you don’t get caught out further down the line.

If you still aren’t sure which of the schemes is right for you and your circumstances, ask for expert advice. Our team here at Oriel are helping people in Liverpool & Merseyside get on the property ladder every day, and they are here to help. So, get in touch to start your journey to own your own home.