Property Buying Guide

Shared ownership schemes run by house builders

Some house builders are now offering shared equity schemes. If they are promoting shared ownership it is usually on behalf of their local Housing Association who will be the co-owner of the property, not the builder.

The new house-builders' shared equity schemes ( HomeBuy Direct)  work on different principles to shared ownership schemes run by housing associations because in that instance you actually buy all of the property paying for the bulk when you move in and not paying for the remainder until later on, when you sell. The crucial difference, however, is that you must, at a later date, buy the remainder of the property from the house builder. This is the principal difference between shared ownership and shared equity. Shared equity is also the basis of the Government's New Build HomeBuy scheme where you take an equity loan for the portion of the property you do not initially purchase.

Unlike a shared ownership scheme run by a Housing Association, the house builder does not necessarily charge interest on the deferred amount and there is no rent. If you only own 90% of the property, for example, and you sell, you will only have to pay the original value of the remaining 10% back to the house builder.

House builders may offer mortgages at preferential rates through links with certain mortgage lenders. However, it is always wise to make your own enquiries with other lenders to ensure you are being offered competitive rates.

There will be a contract between you and the co-owner of the property. Make sure you understand it and there should be no hidden charges, tie-ins or penalties. Consult a property solicitor to be sure.
 
More about shared ownership: 

What is New Build HomeBuy and how does it work?  l Who is eligible and what are the selection criteria? l Special features and how to apply l What is involved with shared ownership and who can apply? l How do I increase my share and how much do properties cost?  l What rights and responsibilities do I have? l Are there restrictions on resale? l Can I buy with someone? And what about finance and legal issues?   l Where do I start and what happens next?   l What questions should I ask? l Will shared ownership really enable more first time buyers to buy a home? l Shared Ownership Mortgage basics  Benefits and pitfalls of shared ownership l The First Time Buyers Initiative/English Partnerships

Useful links

www.communities.gov.uk
www.englishpartnerships.co.uk
www.homesandcommunities.co.uk  
www.direct.gov.uk