Best new-build homes to buy with a deposit under £10,000 through shared ownership
WANNABE homeowners struggling to raise a deposit may want to consider shared ownership where you can get on the ladder for less than £10,000.
Shared ownership lets buyers in England and Wales purchase a portion of the equity in a property if they can't afford to take out a mortgage for the total value of the home.
You co-own your home with a housing association, which will charge you rent on its portion of the property.
Currently, you must purchase between 25% and 75% of the property to use the initiative, and you can then “staircase” - buy more shares in instalments - until you own 100% of it.
The minimum amount you can staircase varies depending on what is outlined in the lease but it's typically between 5% and 10%.
But the scheme is being revamped from the start of next year, which will see the minimum amount of shares home buyers must purchase reduced to 10% and staircasing intervals reduced to 1%.
What to watch out for with shared ownership
SHARED ownership is a government scheme designed to help those struggling to put together a deposit get onto the property ladder. There are a couple of points to watch out for though:
You must meet certain eligibility criteria
You can buy a home through shared ownership if your household earns £80,000 a year or less outside of London, or £90,000 a year or less in London, and any of the following apply:
- you’re a first-time buyer
- you used to own a home, but cannot afford to buy one now
- you’re an existing shared owner
You can end up paying more to staircase
If you later want to buy more of your property - known as staircasing - it's worth bearing in mind that this is based on the property's value at the time, so you'll pay more if house prices go up.
But it also means you’ll pay less if house prices fall.
You will have to pay legal fees and stamp duty tax - if applicable - every time you staircase yoo, which could end up costing you more in the long run.
We previously spoke to a first-time buyer who ended up paying the tax three times after purchasing her shared ownership flat.
The housing association has first dibs on any sale
One of the other issues with shared ownership is that you don’t have as much freedom when it comes to selling your home compared to if you hadn’t used the scheme.
If you own less than 100%, your housing association will get a set period of time to find a buyer, meaning you won’t be able to accept a higher offer from someone else.
Many shared ownership leases also contain a clause that gives the housing association dibs on buying it back before offering it on the market.
If they don’t want it, you can sell it to whomever you want to.
For hopeful homeowners struggling to save, the benefit of this scheme is you only have to put down a deposit on the proportion you own, and you can take out a mortgage for the rest.
Of course, the smaller your deposit the higher your mortgage repayments will be, and the longer it will take you to pay off your mortgage - meaning you'll be building up more in interest in the long-run.
You also don't have to be a first-time buyer, although the scheme is reserved for specific properties and there are some catches to watch out for - see the box above for more information.
It's worth pointing out that there are also different shared ownership rules in and .
If you've done your research on property schemes and decided this is the best one for you, Zoopla has rounded-up some potential properties below that you could get with a deposit of less than £10,000.
Use a property portal, such as Rightmove or Zoopla, to find similar homes in your area.
Don't forget stamp duty has also been waived for all property purchases up to £500,000 in England and Northern Ireland until March 31, 2021.
One-bed flat, Waterlooville, Hampshire
- Total property price: £170,000. Minimum shared ownership property price: £68,000 (40%). Minimum deposit: £3,400 (5%) -
This one-bed flat is available with just a £3,400 deposit, as long as you can get a mortgage on the remaining £64,600.
Two-bed terrace, Bridgwater, Somerset
- Total property price: £210,000. Minimum shared ownership property price: £84,000 (40%). Minimum deposit: £4,200 (5%) -
This flat is at the pricier end of the spectrum compared to others we've listed as the minimum share you can buy is a smaller 25%, which in turn means your rent will be higher as the housing association owns more.
So, say you put down a £5,870 deposit, you'll get a mortgage for £111,630 and the housing association will own £352,500, which makes your monthly mortgage £808. There's also a £192 a month service charge on top.
The flat itself has two bedrooms, two bathrooms, and a private balcony with sea views.
If you're thinking of using one of these schemes, use a mortgage broker to help you find the best deal. Free mortgage brokers include London and Country and Trussle.
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Also see our first-time buyer guide to getting a mortgage.
And here are the best mortgages for first-time buyers.