Shared Ownership vs Help to Buy: Which is right for you?

Shared Ownership and Help to Buy have become big topics in the UK property market in recent years, allowing first-time buyers and others with limited savings to get on the property ladder who might not otherwise be able to. But which scheme is better? What are their advantages and disadvantages? And who can use them? Read on for an explanation of the key differences between Shared Ownership and Help to Buy, along with some simple advice about which scheme will work best for you.

Shared Ownership vs Help to Buy: Which is right for you?

There are two main options for people looking to buy their first home. The first option is Help For First-Time Buyers and the second option, is Shared Ownership. There are some major differences between the two, but they each offer their own unique benefits.

Help For First-Time Buyers aims to help those who can afford mortgage payments but don’t have enough money saved up in order to cover the down payment on a house.

What is Help to Buy?

Help to Buy offers people who are looking to buy their first home the chance of a 20% Government equity loan and the option of a 75% mortgage. You will need a 5% deposit, and this means that you will only need a small amount in savings or funds from your family. It can be used on new-build homes as well as resale properties up to £600,000. This government assistance can help first-time buyers get on the property ladder and enjoy some of the benefits that come with homeownership. 

Help To Buy is not just for first-time buyers either, it can also be used by those who want to move up the property ladder or are currently renting but want more security in their housing arrangements. If you have been approved for Help To Buy, then you may be eligible to take advantage of shared ownership too. Shared ownership is designed to help people who cannot afford the upfront costs and prices that come with buying a house outright. 

With shared ownership, there’s no minimum income requirement but an applicant must earn less than £60,000 per year and they must live in one of these specific areas: North East England, North West England, Greater London (including Inner & Outer London boroughs), East Midlands (including Derbyshire), West Midlands (including Staffordshire), Yorkshire & The Humber (including Lancashire) & South Yorkshire

What is Shared Ownership?

Shared ownership lets you buy as little as 5% of your home with a loan from the government and a 95% mortgage. It's designed to help first-time buyers on low incomes, and it has no maximum house price. But like all types of shared ownership, it means giving up some control over the property. You have to pay rent on the share of the property that isn't yours and may have to sell your stake if you want to move out before 10 years are up. Some people also find it difficult not to be able to make decisions about decor or features like an ordinary homeowner would. However, there are plenty of other options out there for first-time buyers. 

Help to Buy is one option that could be perfect for you because unlike other options such as shared ownership, Help To Buy gives 100% of your deposit back at the end. It does this by providing equity loans which work alongside any other form of financial assistance you might get from parents or grandparents who can help with a larger deposit amount. As well as this equity loan, Help To Buy also provides guarantor loans which offer security without having to put down a large deposit in cash upfront.

The key differences between Help to Buy and Shared Ownership

Help to Buy and Shared Ownership are two government schemes available to help first-time buyers onto the property ladder. Help to Buy lets buyers purchase a new-build property with just a 5% deposit, while Shared Ownership helps people buy a share in an existing property. A buyer using Help to Buy could put down as little as £1,000 or £2,000 – depending on which scheme they use. 

The help they receive from this scheme comes through a mortgage guarantee worth up to 20% of the value of the home that can be offered by any lender. 

This will cover 80% of the purchase price (worth up to £600k) so that buyers only need a small initial deposit. The Help to Buy scheme does not offer any equity in the home; it simply provides some of the funds needed for its purchase.

Which option is right for you?

Help For First-Time Buyers

If you're a first-time buyer, then Shared Ownership could be the perfect option for you. With Help To Buy (Help To Home), the Government puts down 20% of your purchase price and an LTV of 75%, meaning you'll need to make up the remaining 25% yourself. Shared ownership on the other hand requires just a 5% deposit and 95% LTV, meaning that it's far easier to get on the property ladder with this option. 

In order to buy with Help To Buy, there are also strict eligibility criteria which state that applicants can only purchase a new build or land from a registered builder and must be able to afford repayments at a higher interest rate than normal. If you're not in a position to pay the remaining 25% yourself, Shared Ownership might be more suitable. Here, all buyers will have an equal share in owning their home so none are left out in paying for the upkeep of shared areas such as communal gardens and car parks. It also means that when it comes to selling your home again, each owner will receive the same amount back as they paid in so there won't be any huge winners or losers among those who live together.

How do I qualify for Help to Buy? 

The Help To Buy scheme is one where you can only apply if you meet certain eligibility requirements. The qualifying conditions are that you must be aged 18 years old or over, ordinarily resident in the UK, intend to occupy the home as your main residence and have a household income of no less than £50,000 per year. Your house cannot cost more than £600,000 but if it does, the government has capped mortgages under £500,000 - help towards mortgage payments is capped at £100k. There's no maximum value either so long as mortgage repayments remain below 2x salary!