The Government has a number of home ownership schemes designed to help first-time buyers buy their first homes. These differ around the country, and England, Wales, Scotland and Northern Ireland all have their own schemes. In this blog we’ll be discussing them in brief. We’ll also be pointing you towards helpful resources. This way, you can, if you need it, find a scheme that works for you.
Table of Contents
Home ownership schemes in England
Mortgage guarantee scheme
The Government has agreed to guarantee 95% LTV mortgages for first-time buyers who secure their loan with a 5% deposit.
This means that lenders will be more inclined to lend and because the Government has promised to pay their restitution if the mortgage falls through.
This scheme will run until 31 December 2022.
Read more about the mortgage guarantee scheme here.
Help to Buy Equity Loans
The Government is issuing Equity Loans to help first-time buyers purchase new-build Help to Buy properties with smaller deposits.
Equity loans require you to contribute a 5% deposit, plus up to 75% (55% in London) of the home’s price on a regular mortgage. The Government will then lend you money to pay the rest.
You will fully own your property, but the Government gets a share of the equity up to 20% (40% in London) until you pay off the equity loan.
This scheme will run until March 2023.
Read more about Help to Buy equity loans here.
The First Homes scheme offers homes discounted by at least 30%. To be eligible to buy a First Homes property you must fit certain criteria. You must also be able to provide a minimum 5% deposit, possibly more.
This scheme exists in perpetuity and continues to apply after you sell the house.
Read more about First Homes here.
On the Shared Ownership scheme, first-time buyers can purchase a stake in their home from a housing association, with rent paid on the remaining share. This has the benefit of requiring a smaller mortgage, but has some drawbacks. This includes a risk of being more costly long-term than more traditional ownership, and only being available on a leasehold basis.
Right to Buy
The Right to Buy scheme is one of the most well-known Help to Buy schemes, but it’s also one of the most controversial.
In Right to Buy, people who rent public sector housing (also known as a “council house”) for at least three years can claim a discount of up to £84,600 (£112,800 in London) to help them buy.
Right to Buy has been subjected to criticism for reducing the amount of council housing stock left available for rent. This means most of the remaining council estates are in areas where owning property is of little value, such as distance from transport and employment opportunities.
The Lifetime ISA is a long-term savings product sponsored by the Government, to help first-time buyers to save up for a mortgage deposit. You can save up to £4000 a year, and the Government will add 25% on top of whatever you have saved at the end of each year, meaning you could get up to £1000 paid in every year as a return on your savings.
The bank allows you to withdraw your ISA twelve months after opening it.
For more information on the Lifetime ISA, see here.
Home ownership schemes in Wales
Shared Ownership – Wales (Rhanberchnogaeth – Cymru)
Similar to the English scheme, but initial stakes start at 25% rather than 10%.
Help to Buy – Wales (Cymorth i Brynu – Cymru)
Under the Help to Buy – Wales scheme, the Welsh Government provides a shared equity loan to buyers of new-build homes. It requires buyers to provide 5% deposit, and the loan provides up to 20% of the purchase price.
You must take out a repayment mortgage (i.e. not an interest-only mortgage) to cover the remainder.
Homebuy – Wales (Prynu Cartref – Cymru)
This is a special scheme in Wales that helps people in rural areas to buy homes. It offers an equity loan of 30-50% for first-time buyers who fit specific criteria. It is only available to those who fit those criteria, so you will need to check eligibility.
Home ownership schemes in Scotland
Low-Cost Initiative for First-time buyers (LIFT)
In Scotland there are two shared equity schemes under the LIFT banner – Open Market Shared Equity (OMSE) and New Supply Shared Equity (NSSE). It’s open to first-time buyers and members of certain priority access groups.
On the OMSE you pay for between 60 and 90% of the home’s cost. On the NSSE it’s 60 and 80%. If you pay for 60% of the home, the Scottish Government will cover the remaining 40%.
OMSE homes are available on the open market within certain price thresholds. NSSE homes are new-builds owned by housing associations.
For more information about the LIFT schemes, see here.
First Home Fund and Help to Buy (Scotland)
The Scottish Government is no longer offering the First Home Fund or Help to Buy shared equity scheme. The withdrawal of the First Home Fund after just five working days sparked much consternation in Scotland back in April this year.
Home ownership schemes in Northern Ireland
Co-Ownership is similar to the Shared Ownership schemes in England and Wales, but it’s not the same.
All property on the Co-Ownership scheme is bought freehold by Co-Ownership, a not-for-profit housing association. Unlike the England and Wales scheme, the freeholds for Co-Ownership properties are not already owned by Co-Ownership. Instead, the prospective leaseholder and Co-Ownership agree on it prior to purchase, based on certain criteria. Co-Ownership buys the freehold, then sells shares in the leasehold to the buyer.
Co-Ownership properties have a value no higher than £165,000. Shares start at 50% up to 90% and you pay rent on the remainder.
Co-Ownership is only meant for people who have no alternative, and who can afford it. In this way, it is more like claiming a housing benefit than buying a leasehold.
See here for more details.
The equity sharing scheme in Northern Ireland is also similar to the Shared Ownership schemes in England and Wales, with some differences.
If you are resident in Northern Ireland and live in social housing, you can buy a share in the equity, allowing you to lower the amount of rent you pay to the social housing landlord.
Equity sharing will end at midnight on 27 August 2022.
For more information, click here.
House sales scheme
The house sales scheme is similar to the Right to Buy scheme in England. It is for tenants of social housing landlords, such as the Housing Executive, to buy their homes at a discount. Specifically, tenants who have lived in social housing for a minimum of five years have a right to buy their home at a 20% discount. This discount increases by 2% for each additional year to a maximum of 60%, or £24,000, whichever comes first.
You may sell your home, but if you sell it within five years of buying, you may end up having to pay back the full discount. This is to discourage dishonest buying and reselling of social housing.
Click here for more information.
Rent to Own
The Northern Ireland Rent to Own scheme is designed for people who can’t yet afford to buy a home, but would like to do so in future. It is similar to the Co-Ownership Scheme mentioned above. However, in this case, you are considered a tenant, not a homeowner.
You rent their house from a subsidiary of Co-Ownership known as OwnCo Homes. After a year, OwnCo permits you to buy the home off them, and you must have purchased the home after three years of tenancy. Therefore, you must be serious about owning a home within three years from the start of the tenancy.
These are some of the schemes designed with first-time buyers in mind. There are other schemes available too:
- In England, the Home Ownership for People with Long-term Disabilities (HOLD) and Older People’s Shared Ownership (OPSO) schemes are designed with disabled homebuyers and older homebuyers in mind.
- Help to Build and Self-build are schemes in England and Scotland for people who want to build their own homes.
Credibble offers two fabulous solutions.
If you’re preparing to take a mortgage, never apply until you’ve tried our unique and FREE Credibble Home app. Our smart technology will tell you what you need to fix so you avoid rejection. The app predicts when you will be able to buy, for how much and tracks your month-by-month progress to mortgage success. We’ve even added your own mortgage broker, so you get the best deals available.
More focused on your credit rating? Well, get started for free with Credibble’s 24- Factor Credit Check to truly help you improve your creditworthiness and how lenders view you. (Remember: lenders don’t use your credit score! We’ll show you what lenders look for and how to get your credit report in the best shape possible).