Other ways to buy and rent
Shared Ownership and Help to Buy are the two governement backed affordable home ownership schemes which are the most well known amongst first time buyers. There is significant government funding assigned to both Shared Ownership and Help to Buy, meaning there will be an ongoign programme of new homes built under these schemes.
However, Shared Ownership and Help to Buy are not the only schemes available to first time buyers who are looking for help to get on the housing ladder. Below we outline some of the other schemes available to help first time buyers and renters saving for a deposit.
Discount Full Ownership
Discount full ownership is currently only provided by Pocket. Pocket is a private developer (not a housing association) working with local councils to build developments of 15-50 one-bedroom apartments on small urban sites. Pocket homes sell for at least 20% below local market prices. With Pocket, you can purchase 100% of your home; there is no shared-ownership, no equity retained, no rent to pay, no ‘staircasing’. It’s all yours.
You will need to arrange a mortgage, which will typically require a deposit of 20% of the sale price. The amount of deposit required will depend on the mortgage provider you choose, the terms of the mortgage and your credit rating. You will also need to cover the cost of the mortgage valuation or survey, legal fees, and stamp duty (if applicable), which typically comes to approximately £4,000. Finally, in addition to your mortgage repayments, when you move in you will also need to pay a reasonable service charge to Pocket for maintenance and upkeep of communal areas and the grounds of your building – this varies from building to building.
Discount Market Sale
Designed for first time buyers and for people without an interest in another property to get on the housing ladder.
An applicant may buy a new build property on certain developments for a percentage of it’s current value, provided that when they come to sell it, they only receive the same percentage of it’s current value back. You can staircase (buy the remaining interest) typically, from the Council, who will have an interest in the remaining equity, but it is at their discretion and you will have to do it in one go.
Unlike a shared ownership scheme, there is no rent to pay on the remaining interest held by the Council.
As with most affordable housing schemes, you can generally only purchase a property under the DMS scheme, in a Local Authority you have a link to; for example an Authority that you either live or work in and your household income must be below the limit stated.
If you’re a first-time buyer the Starter Homes scheme could help you buy a new-build home with a 20% discount. The maximum cost of a home offered via the Starter Homes scheme will be £250,000 outside London and £450,000 inside London.
The Starter Homes scheme has not yet launched, but planning is underway. Updates will be posted on Share to Buy when they are available.
Rent to Save
Rent to save is designed to enable aspiring home-owners to move into the home they have chosen, even if they have not yet been able to save a sufficient mortgage deposit.
As the rent will be at a lower than market rate, you will be able to save throughout the period of your tenancy. Using typical assumptions for rental levels and mortgage deposits for shared ownership, a household regularly saving just the difference between their rent and market rent would have a sufficient deposit in less than two and a half years.
The housing provider will discuss with you your savings goal from the outset of the tenancy and how you should work towards this. The housing provider will explain to you how they will review your savings goal on an ongoing basis to ensure you are on course to achieve it.
The key features of the product are:
- Let at up to 80% of the equivalent market rent for that property, with a fixed rate of inflation.
- The property would be let on an assured shorthold tenancy for a fixed term, up to five years, linked to (but not necessarily the same as) the required savings period. The period can be extended if you still want to buy but need a bit more time.
- The tenancy can be ended, subject to the terms of your tenancy agreement and initial fixed terms being spent, at any point.
- A savings plan will be put in place to help you raise a sufficient deposit to purchase on either shared ownership or equity loan terms within five years.
- The housing provider will discuss with you their regular reviews to check your progress in saving for a deposit.
- You can purchase on shared ownership or equity loan terms at any point in the tenancy, subject to still being eligible (see the Am I eligible? page)
Intermediate Market Rent
Intermediate Market Rent (IMR) is an Affordable Rent Scheme designed to assist working households who are unable to afford the cost of renting a home on the open market or cannot access social rented housing.
- Intermediate Market Rent is usually set at around 80% of the market rent value of similar property in the local area.
- The service charge is included in the rent.
- After entering a six month assured shorthold tenancy it is then renewed on a monthly basis, although some initial rental periods can be longer. All rentals will be subject to a credit check and referencing.
- Deposits are held within the deposit protection scheme and provided the home is returned to the landlord in the same condition as when it was let to you, the deposit is returned.
- Each rental development will have eligibility criteria. This can be based on the type of accommodation and the area in which a potential tenant currently lives or works.
- Tenancy can be terminated with one month’s notice. Should the landlord wish to terminate, they are required to give two months’ notice.
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