Home Buying Advice

Low Cost Housing

Could you be eligible for low cost housing to enable you to get your foot on the property ladder? If so, you will find a number of different low cost home ownership schemes available.

Who is eligible for low cost housing schemes?

There are many different ways you can get help buying a home if you cannot afford to buy. Each individual low cost home ownership scheme will have its own criteria – so check the details of each scheme with your landlord or the relevant HomeBuy Agent.

You may be eligible for low cost housing if you are:

1) a council tenant

2) a housing association tenant

3) a key worker (eg teacher or police officer)

4) a first a time buyer who can't afford to buy a property (you have a household income of £60,000 per year or less) or are identified by the Regional Housing Board as a priority case for low cost home ownership. 

If you do not meet the above criteria you will need to look at other options.  There's plenty about those on this site.

Demand for these kinds of schemes is high and some local councils and housing associations may limit the scheme to those who are on their housing lists. The different schemes are listed below:

A. Discount low cost housing schemes

These are offered by social (council and housing association tenants) landlords and give their tenants the chance to buy their rented home outright at a discount, which is calculated according to where you live.

The two main discount schemes are ‘Right to Buy' for council tenants and ‘Right to Acquire' for housing associations tenants.

1   Right to Buy: If you are already a secure tenant of a local authority property and have lived in the same home for at least two years – or five years if you moved after 18 January 2005 - you may be eligible for the Right to Buy scheme. This enables you to buy the property which is already your home at a considerable discount. You have a Preserved Right to Buy if the ownership of your council property was transferred to a Housing Association, but you have to have been living continuously in the same property.

The discount varies from area to area but works out at between £16,000 and £38,000 off the independently-assessed current market value of your home. To find out more, contact your landlord and ask for the booklet: "Your right to buy your home."

If you sell the property within five years, however, you will have to pay back some or all of the discount. If you sell after one year, you will have to pay back 100% of the discount; after five years, you must pay back 20% of the discount.

Remember, though, that once you are a homeowner, you will have not pay not only the mortgage but interim service charges plus your share of any major or minor repairs. When you are a council or housing association tenant, the service charges are included in your rent, and there is no more to pay. Buying will also incur costs such as legal fees, stamp duty, mortgage arrangement fees and survey fees.

2   Right to acquire: The Right to Acquire is a similar scheme, but is limited to secure tenants of Housing Association properties. Here, the discounts are smaller and range from £9,000 to £16,000 depending on where you live. Again, you will have to pay back some or all of your discount if you sell within five years, and if you sell within 10 years you must first offer the property back to your landlord at the current market value. If he doesn't want it you are then free to sell on the open market. The Housing Association helpline is on: 0845 230 7000.

B. Cash incentives for low cost housing

Your council may also run a cash incentive scheme where they offer you money to move to a smaller property, so that they can use the space to house other people on their waiting lists.

The details of the scheme vary from council to council, and not all councils offer the scheme. To find out more, contact the housing department of your local council.

C. Shared equity low cost home ownership schemes (Open Market HomeBuy)( No longer available)

Open Market HomeBuy was ashared equity scheme. Combining a shared equity mortgage and an equity loan you could afford to buy a first property. Open to key workers and first time buyers with a household anual income of £60,000 or less. Find out more in our shared equity section.

D. Social HomeBuy low cost housing schemes 

This scheme allows tenants of local councils and housing associations to buy a share in their current home at a discount. Not all landlords participate in this scheme. 

E. New Build HomeBuy low cost housing 

Enables people to buy a share of a newly built property and pay a rent on the remainder (this includes the First Time Buyers Initiative which uses public sector land).  Your monthly outgoings will include repayments on any mortgage you have taken out, plus a monthly charge on the part of the property kept by the landlord. With the shared ownership scheme, when you can afford it, you can increase your share until you own the whole property. The purchase of further shares is based on the current market value of the property, whether it has gone up or down. This is sometimes called ‘staircasing'.  Find out more in our shared ownership section.

F. Open Market Build HomeBuy scheme shared equity loans for low cost home ownership - no longer available

This was a specific type of shared equity loan where the lender shares in any rise (and sometimes any fall) in the value of the property when the property is sold.

These are schemes where the landlord or a bank or building society lends you money for part of the cost of your mortgage. You may have to pay interest on the amount you owe but it is limited to a fixed rate set by the lender.

The Government also offers a 17.5% Government Equity Loan which purchasers will be able to use in conjunction with a mortgage from any lender. Contact your HomeBuy agent.  Find out more in our shared equity section

G. HomeBuy Direct shared equity scheme for new-build homes. With these schemes you can be closer to owneing a brand new home - in exchange for part oaf any equity growth - though you have to take out an extra loan. Find out more in our HomeBuy Direct section.

This scheme may be for you if you are able to meet most of the costs of buying a home.
 
Useful Websites:

www.direct.gov.uk/
www.communities.gov.uk/
www.housingcorp.gov.uk/