Help to buy, shared ownership schemes and staircasing

Thursday, 20th December 2018 | by: Peter Barry

With house prices in some areas of London having risen 10-fold over the last 20 years it is becoming increasingly more difficult for young people to get their foot on the property ladder. Initiatives that have increased in popularity since they were first introduced in 2013 are the Help to Buy and Shared Ownership schemes.

The Help to Buy scheme allows owners to purchase a property with a 5% deposit, 55% mortgage and 40% Government loan (this is reduced to 20% Government loan outside of London). The property must be; a new build, have a purchase price of no more than £600,000, be the only one you own and not be for investment purposes.

The benefits of this include a much lower deposit, with no interest to be charged on the Government loan for the first five years. If the load has not been re-paid after 5 years a fee of 1.75% will apply the following year – the percentage fee rises annually by the retail prices index (RPI) plus 1%. The idea of the fees is that they encourage you to repay the loan before they are triggered.

The Shared Ownership scheme allows a potential buyer to purchase between 25%-75% of a property and the local housing association or registered provider to purchase the remaining shares of the property. The result is that you effectively ‘part own and part rent’ the property. To be eligible for the scheme; the household must earn less than £80,000, be a first-time buyer or not be able to afford a new home or be an existing shared owner. Your name must not be listed on the deeds of another property.

The advantages include the ability to buy the type of property you want a lot sooner than at normal market value and with a much smaller deposit. The rent is normally less than on the open rental market and you have security of tenure. An ‘Older people’s shared ownership’ scheme is also available for owners over 55 years old.

The disadvantages are rent is still payable to the landlord and the owner is treated like a tenant having to pay maintenance and service charges. If you fail to pay your rent you can be evicted much like under a regular Assured Shorthold Tenancy.

In practice these schemes allow first time buyers to purchase a property when they wouldn’t, under usual circumstances, have the ability to do so.

How can we help?

‘Staircasing’ is the process of buying more shares in the property from the local housing association or registered provider. To do this, a Red Book Valuation will need to be undertaken by an RICS Registered Valuer to determine the market value allowing the tenant to then purchase more shares. There are strict guidelines regarding how the valuation is undertaken.

As part of the valuation the surveyor undertakes a visual internal and external inspection and confirms the floor area. External factors that are considered include the type, construction and condition of the chimney stacks, roofs, rainwater goods, walls, damp proof course, sub-floor ventilation and external joinery. Internally the type, construction and condition of the ceiling, walls, chimney breasts, floors, dampness, timber defects, kitchen, bathroom, services and outbuildings are all taken into account. The location and character of the area are also hugely important to the valuation.

Once the inspection has been undertaken comparables are sourced through local estate agents and online databases. The best comparables are those which have been sold most recently and are most similar to the subject property. Comparables are adjusted to allow for differences in size, condition, location etc. as part of the process of arriving at a final figure

If you are considering purchasing a further share of your property and require a valuation we’d be happy to provide some additional advice and a fee proposal. Please contact us on 020 7183 2578 or by email.

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