If you’re looking for government help to buy a property,
Help to Buy and
Shared Ownership could both be a possibility. But working out which one is right for you can be confusing.
What are the two schemes?
The first step in deciding which right for you is to make sure you know what both schemes involve.
Help to Buy
Help to Buy requires you to save up a 5% deposit for a property and get a mortgage for 75%, and then you get a government loan for the remaining 20%. The aim is to allow movers to buy a property with a much smaller deposit. The loan is interest-free for five years. You pay it off when you move or when your mortgage is paid off – whichever comes first.
NOTE: Applications for the Help to Buy Equity Loan Scheme are currently only available in Wales.
Shared Ownership
Shared Ownership is where you buy a portion of a property (usually between 25% and 75%) and the rest is owned by a housing association. You pay mortgage repayments on the portion you own and reduced rent on the portion you don’t. Again, the aim is to allow people to buy a house without having to save up such a hefty deposit. With Shared Ownership, you can do what is called ‘staircasing’ – gradually buy more of the property until you own the whole thing.
Comparison of Help to Buy and Shared Ownership
Here are some key differences (and some similarities) to take into account when you’re deciding which is right for you.
Eligibility
- Help to Buy: As of April 2021 you must be a First Time Buyer in Wales who is not renting their existing home. You should be able to fund at least 80% of the property price through a combination of a repayment mortgage and a minimum deposit of 5%.
- Shared Ownership: You must not currently own another home (or you must at least be in the process of selling it), you must be over 18 and your income must fall below a specified threshold.
There is no set income threshold for the Help to Buy Scheme – it will depend on your location and how much you’ll need to borrow. But as a general rule, for a mortgage you can’t borrow any more than 4.5x your gross annual income, so working out what you can borrow here might be a good starting point.
For Shared Ownership, your household income must be less than £80,000 per year (£90,000 in London). You also must be over 18 and you must be unable to afford to buy a suitable house through the open market.
For both schemes, you may not be eligible if you have a poor
credit history, you’re in mortgage or rent arrears or your savings are not judged to be sufficient to cover the process of buying the property.
You can work out how much the process might cost using our
Moving Cost Calculator.
Property type
- Help to Buy: Specified new builds only, from a builder registered with the scheme, with a maximum price of £300,000.
- Shared Ownership: Any Shared Ownership property – most are new builds, but some are resales.
You can do a simple search for Shared Ownership properties in your area on the
Share to Buy website.
Deposit size
- Help to Buy: 5% of the property price.
- Shared Ownership: 5% of the portion you’ll be buying.
Because you’re only buying a portion, often Shared Ownership requires you to save a smaller deposit than Help to Buy. For example, if you’re buying a £400,000 home with Help to Buy you’ll have to save £20,000. However if you bought a home of the same price with Shared Ownership – say you were buying a 25% share – then you’d only need to save up for 5% of £100,000, so £5,000.
Ownership
- Help to Buy: Although you’ll have an outstanding mortgage and government loan, you’ll effectively own 100% of the property. Help to Buy properties are almost always freehold.
- Shared Ownership: You’ll only own a portion, usually between 25% and 75%, unless you staircase up to 100%. Shared Ownership properties are almost always leasehold.
Read about the difference between
freehold and leasehold.
Monthly repayments
- Help to Buy: For the first five years you’ll only pay mortgage repayments (plus a £1 per month management fee). After that you’ll pay interest as well.
- Shared Ownership: You’ll pay mortgage repayments and discounted rent.
Five years after your Help to Buy loan you’ll start to pay interest on it. This interest is 1.75% of the amount you borrowed but it will go up each April. Read
how your Help to Buy interest is calculated.
Selling the home
- Help to Buy: You can sell your home through the open market. If you haven’t already paid it off, this is when you’ll pay back the government loan.
- Shared Ownership: You must first offer the property to the housing association so they can find another Shared Ownership buyer. If they can’t find a buyer, then you can sell it on the open market. Read more about selling your Shared Ownership property.
Both will require an
independent market valuation when you’re selling the property.
With the Help to Buy loan, bear in mind that you’ll pay back 20% of the property price at the time of selling, so you might end up paying back more than you borrowed.
Making decisions in the property-buying process is never easy – it can feel like there’s a lot riding on them. But as long as you do your research and you’re honest with yourself about what you want, you’ll be unpacking in your new home in no time. If you need more advice, the
Help to Buy website has lots of information about both schemes.