By Frances Traynor
11th December 2017
Wed 22 Nov 2017 by Tony Lilleystone
Many more first-time buyers will be able to buy a home of their own thanks to changes on the government Help-to-Buy scheme announced today in the Chancellor's Autumn Statement. Some of the changes will also help existing homeowners who need to move home.
The major changes are:
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Shared ownership allows people to buy a share of a home – rather than the whole house – and then buy a greater share over time as they can afford to. They pay rent on the rest of the property. The present limits on Help-to-Buy Shared Ownership are being lifted. Anyone who has a household income of less than £80,000 outside London, and £90,000 inside London, will be able to buy a home through shared ownership. The scheme will apply across England.
People can buy a share between 25 percent and 75 percent of a home. The remaining share of the property is retained by a housing association, but buyers can elect to purchase this share later on, either in one go or in specified tranches. This process is known as "staircasing". Rent has to be paid on the outstanding share but the rent won’t be more than 3 percent of the amount left.
For example, on a house worth £227,000 where the buyer has bought a 40 percent share, the rent won’t be more than 3 percent of the remaining 60 percent – in this case, £4,000 a year, or £340 a month. Buyers do not have to fund the whole of their share themselves, and mortgages can be obtained from many high-street lenders to purchase shared ownership homes.
Help-to-Buy equity loans are already open to both first-time buyers and home movers on new-build homes in England with a purchase price up to £600,000. The Chancellor is now extending the Equity Loan scheme up to 2021.
Currently, if you’re able to pay at least 5 percent the value of your home as a deposit, the government will lend you up to 20 percent of the rest of the value of the property, alongside your mortgage of up to 75 percent. No interest or fees are is charged on equity loans for the first five years of owning your home. If you sell your home, the amount that has to be repaid will depend upon the home's value at the time of sale, so you may have to repay more than the amount originally borrowed.
To reflect the current property market in London, from early 2016 the government will increase the upper limit for the equity loan it gives new buyers within Greater London from 20 percent to 40 percent.
With London Help to Buy equity loan:
Starter Homes are new-build homes available at 20 percent off the market price. They are only open to first-time buyers under 40. Around £2.3 billion will be spent on building 200,000 Starter Homes over the next five years. This money will be given to house builders to provide a 20 percent discount on new homes. If you're a first-time buyer, check out Homeward Legal's comprehensive First-Time Buyers' Hub where all your questions about purchasing for the very first time are covered in detail.
At present council tenants have the right to buy the homes they are renting, usually at a discount depending on how long they have lived there. Right to Buy will now be extended to housing association tenants during 2016, giving over one million households the chance to become home owners.
Higher stamp duty to be paid on second homes and buy-to-let properties The Chancellor says he will use money raised from tax on people buying their second home to help those struggling to buy their first home. From 1 April 2016, people purchasing additional properties such as buy to let properties and second homes will pay an extra 3 percent in stamp duty.
The present government is clearly committed to the goal of more home ownership. People who have not previously been able to afford a home will now be able to buy one. Buyers will usually need to contact a housing association to find out if they qualify under one of the Help-to-Buy schemes. These housing associations can give a lot of advice but buyers should still contact an independent solicitor once they have been approved.
The operation of the various schemes can be quite complicated – for instance, if you buy under the shared ownership scheme, you may face restrictions if you want to sell the property – so you should understand exactly what you are letting yourself in for before going ahead.
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