Credit Crunch

Getting onto the property ladder

During this time of ‘credit crunch’, many people are finding it increasingly difficult to get a first foot on the property ladder. With our money having to stretch further than it used to, combined with the general clamp down on borrowing, first time buyers are being hit hardest when it comes to getting onto the property ladder.

One answer is to buy into a shared-equity or shared-ownership package. The government have established the ‘Open market Home Buy Scheme’ which is available to ‘key workers’ in the public sector, such as nurses for example, as well as those on council waiting lists and other priority first time buyers. These individuals can purchase shared-equity homes through their local HomeBuy agent.

However, shared-equity properties are not only available to those people; indeed, anyone can purchase a home this way via an ordinary estate agent or private home sale. Anybody who owns a share of the property they live in is entitled to then sell their share on the open market – unless there is some clause in their original purchase agreement to sell back to the agency they purchased from – so any buyer can then get in on the scheme.

It works very simply – if a property’s value as a whole is £100,000, and you buy a 50% share, you pay your mortgage on that portion, which would be £50,000 and pay a rent value on the other 50%. It is usually possible to purchase in blocks of 25%, and most providers encourage buyers to increase their ownership of the property with time. The amount you get for your home if you choose to sell is based on market value, so let’s say your share cost you £30,000 and, when your home is valued, your share is worth £40,000, you’ve made £10,000 profit.

Many companies and housing associations have latched onto this as a way of attracting first time buyers and even second and third time buyers. Many of the properties that are available as shared-ownership are ‘starter’ homes which are small, two-bedroomed houses or flats, but others are family sized homes.

If you wanted to buy a shared-ownership property, make sure that your mortgage lender is prepared to lend you the money before you make any offers. Most tend to be happy to do so but some mortgage providers do make a lot of demands and conditions before they’ll lend on such property.

You can get advise on purchasing shared-equity housing from www.shared-equity.net and many other sites on the internet.