Raising a deposit and securing a mortgage are not as straightforward as they once were, largely due to the modern cost of housing.
With house price growth having outstripped wage & salary increases in recent years, more and more people are looking to alternative methods of entering the housing market and finding the property of their dreams.
Beyond the traditional route of 'saving for a deposit', a range of choices are now available to assist you in getting your first foot on the housing ladder.
Some options are government initiatives, backed by the financial services industry, while others are less complicated. To help you decide which suits you, we have provided some information on the options currently available for buying a property.
What is Joint Ownership?
One of the most popular routes to buying a house that many first time buyers are considering is joint ownership. It involves buying a property with another party, such as partners, friends and even, in some cases, strangers.
When buying a property with a co-owner there are some important considerations that need to be made in order to protect against any future breakdown in the relationship. There are 2 options buyers will have to consider when entering into such an arrangement: Joint Tenants and Tenants in Common.
What Is The Difference Between Joint Tenants And Tenants In Common?
Joint Tenants – Regarded by law as having equal ownership to the property in question. This means that when one joint tenant dies, ownership passes to the remaining co-owners.
The transfer of possession to the surviving party or parties supersedes any Will, meaning that, unless you are the sole survivor in the agreement, you are unable to leave the property to anybody other than the other joint tenants.
This arrangement traditionally underpins the agreement held by married couples and those in civil partnerships.
Tenants in Common – Regarded by law as holding separate shares in the property, tenants in common can leave their share to somebody other than the co-owner.
Unlike a joint tenant, ownership does not automatically pass to the other party, meaning the instructions of a Will take precedent and the beneficiary takes ownership of the deceased's share of the home.
This is the more common arrangement for those who buy with a partner – where, legally, the ties are not as binding as marriage or civil partnerships – friends or strangers.
It is possible to change this status at any time during your ownership of a property, for reasons such as getting married or getting a divorce. It is advisable to discuss the options with your solicitor when your circumstances change.
What Is A Declaration Of Trust?
A Declaration of Trust is a legal document that defines the extent of the agreement between the owners of a property and protects their original contribution to the purchase, particularly important for those who are Tenants in Common.
A Declaration of Trust can range from a simple – but legally binding – record of what percentage of the property belongs to who; to a more complex document setting out conditions such as:
- Who can inhabit the property
- Responsibility for mortgage repayments
- Who can decide on when the property is sold (or what happens when one party wishes to sell and the other does not).
A Declaration of Trust should, if it is to offer you the highest degree of protection, lay out the fundamental terms of your tenants in common arrangement, so that when any issue does arise, or the time comes to sell, there is no doubt as to who is responsible for what and how the profit from a sale is divided up.
It is a good idea to involve the expertise of a professional conveyancing lawyer when drawing up such a document, to ensure your interests, and those of the other parties, remain safeguarded throughout.
If co-owners have a joint tenancy, there is a presumption that, should the relationship break down, each co-owner is entitled to an equal share in the Property.
What Is A Shared Ownership Scheme?
A shared ownership scheme allows new buyers to step onto the housing ladder by buying a share in a house (between 25% and 75%), while paying reduced rent on the remainder to a housing association. The option to increase your share in the property at a later date remains open.
To be eligible for the shared ownership scheme, you must have a combined household income of less than £80,000 (£90,000 in London).
During your ownership you may acquire more equity in the property by 'staircasing', which means buying an additional share according to the current value of the property. You may also be obliged to offer first refusal to the housing association if you decide to sell.
What Is The Help To Buy Scheme?
Help to Buy is a series of government-backed schemes, including shared ownership, offering first time buyers a foot onto the housing ladder. These include:
- Help to Buy: Equity Loan – Up to 20% loan on the cost of a new build (40% in London), leaving you to raise a 5% cash deposit and a 75% mortgage. There are no fees to pay on the Equity Loan for the first 5 years of ownership. It is available to first time buyers and existing homeowners looking to move, on properties up to £600,000, as long as the borrower owns no other property at the time they buy their house.
- Help to Buy: ISA – See below.
What is a Help to Buy: ISA?
The Help to Buy: ISA is a saving scheme which offers a 25% government paid boost to the amount you place into your account. When you open a Help to Buy: ISA, you can pay in a lump sum of up to £1,200 and afterwards a maximum of £200 per month. You need to have saved at least £1,600 to qualify for the 25% bonus, which is capped at £3,000, an amount you would have to have saved £12,000 to receive.
The Help to Buy: ISA is not restricted per household, so you and your partner or spouse (if applicable) can both open one, offering the possibility of a £6,000 bonus. To receive the bonus, you will need to have your conveyancing solicitor make an application to the government. They will then receive the Help to Buy bonus, which must be added to the funds with which you intend to buy your property. The bonus cannot be put towards the deposit, or any other costs that arise during the house buying process.
Help to Buy: ISAs are available to any UK resident over the age of 16, so long as you have a valid National Insurance number and are a first time buyer. If you already own a property in the UK, or anywhere else in the world, you are not eligible for this account, and if you have opened another cash ISA this tax year, you should move the money to another account when you open the Help to Buy one, as you are only allowed to open and pay into 1 cash ISA per year.
Further criteria, which need fulfilling to qualify for the government bonus, regards the property you intend to buy. It must be in the UK; have a price tag no higher than £250,000 (£450,000 in London); not be let out; and be bought in conjunction with a mortgage.
You can apply for a Help to Buy: ISA with most of the major banks and building societies, as well as some of the smaller ones.
If you need more advice with paying for your property using a Help to Buy ISA, give us a call on 0800 206 1521.
What is a Right to Buy purchase?
If you are a Council Tenant, you are entitled to buy the home that you rent at a discount, provided that the following applies:
- It is your only or main home
- It is self-contained
- You are a secure tenant
- You have had a public sector landlord (e.g. council, housing association or NHS trust) for at least 3 years – it does not have to be consecutive years.
The amount of discount you receive will depend on the length of the tenancy. You may be eligible for a reduction of up to a maximum of £77,900, or £103,900 if you live in London. You will need to instruct a solicitor to act on your behalf and they will liaise with the Council or their solicitors in order to arrange the property into your name.
Once you own the property you are entitled to sell, although you will be liable to repay the discount provided by the Council if you sell within 5 years of the purchase.
To find out how we can help you buy your council home, contact our Conveyancing department today.
Get a Quote Today
Our expert team of Conveyancers and Solicitors are on hand to offer you the quality assured Conveyancing service that you expect. We can advise on any aspect of the process and are happy to discuss how we can help make the process as swift and pain free as possible – we want to get you into your new home almost as much as you do!
Call us on 0800 206 1521 to obtain your quote or alternatively fill out our enquiry form and one of our friendly team will be able to start you on the path to your new home!