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Affordable housing schemes

Affordable housing refers to properties which are available to buyers at below market value, for sale or rent. Affordable housing schemes can be offered by the government, local council or even property developers.

There are several affordable housing schemes to support you when buying a home. If you use one of them, you could decrease the amount of deposit you need. However, depending on what initiative you choose, you may not own the entire property and could be liable for paying a monthly rent on top of your monthly mortgage payment. Some affordable housing schemes include:

  • Help to Buy
  • Shared Ownership
  • Shared Equity
  • Right to Buy

The good news is that TSB will be able to assist you with whichever initiative you decide is right for you. TSB supports most of the schemes, so just give us a call today or talk to a mortgage adviser to find out more. We will support you with your mortgage application for any of the above schemes wherever you are in the United Kingdom. All applicants will need to meet the usual requirements for mortgage lending and maximum property value will vary per region.

Don’t forget, we can help you if you are buying a home or looking to remortgage when already using one of these schemes.

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Help to Buy schemes are government initiatives which aim to help first-time buyers get onto the property ladder.

There are various Help to Buy schemes in the UK. Some of these include:

  • Help to Buy equity loans
  • London Help to Buy
  • Help to Buy Isas (No longer taking new applicants)

Help to Buy equity loans are available to first-time buyers purchasing a new-build property. Regional price caps for properties are also in place.

The customer puts down a deposit of at least 5%, then the government can lend the customer an equity loan, which can be up to 20% of the property's value. The customer then takes out a mortgage on the remainder of the property’s value. After 5 years, the customer starts to pay interest on the loan they received from the government.

This scheme is no longer available to new applicants. However, this was a tax-free savings account for first-time buyers. The government would contribute 25% of the customer’s savings, up to £12,000. So, the maximum contribution from the government would be £3,000.

Shared ownership schemes are usually offered by housing associations. Also referred to as ‘part rent part buy’, the customer buys a stake of a home, usually between 25-75%, then pays rent on the remaining stake. Over time, the customer can buy more ownership of the property, which is known as staircasing.

These schemes are available to first-time buyers, previous homeowners who cannot afford a home right now, as well as current shared ownership homeowners who are looking to move. Regional household income caps are also in place.

They are ideal for customers struggling to afford a property outright. They allow customers with lower incomes who are unable to pay large deposits to get onto the property ladder.

The deposit for the property can be as low as 5% of the customer’s stake, rather than the total property price. The rest of the share is paid for with a mortgage. The rental payments can be up to 3% of the total remaining shares.

Overall, shared ownership schemes allow customers to get onto the property ladder more quickly than buying the entirety of a home. Customers can then staircase to buy more stakes in the home over time. Shared ownership can work out cheaper than renting. Customers are also able to sell their shared ownership and benefit from any increase in the value of the property.

However, there may not be as much option on the location of shared ownership properties, compared to buying a home outright. Staircasing does allow for the customer to own a higher stake of the home overtime, however this can be difficult if the property value increases, as share prices will too. Customers are also required to pay service charges, like with other leasehold properties.

Shared equity schemes enable a customer to receive a loan, usually from the government or property developer, which contributes towards the deposit of a property. A shared equity mortgage is then used to pay for the remainder of the property.

Despite what the name suggests, when a customer takes out a shared equity loan, they do own the entirety of the property. The name refers to the equity loan which contributes to the deposit. A larger deposit could enable buyers to qualify for cheaper mortgage deals.

Shared Equity schemes are not the same as Shared Ownership. When distinguishing between the two, it is important to remember with shared equity, the customer takes ownership of the entire property, although part of the deposit is made up from a loan. With shared ownership schemes, the customer owns a certain percentage of the home and rents the remainder.

Shared equity schemes are ideal for first-time buyers who are struggling to pay the deposit on a property. It can be difficult to save up for a full deposit, especially with rising property prices. Shared equity schemes allow buyers to pay the deposit on a home, whilst only needing to raise 5% themselves.

Customers are required to repay the loan however, which over time can increase with rising property prices. This means shared equity schemes can end up being more expensive than paying the full deposit fee and getting a normal mortgage, depending on loan repayments. An unpaid shared equity loan can also cause complications when trying to remortgage a home.

The Right to Buy scheme allows tenants to buy a council property at a discounted rate.

To qualify for the right to buy scheme, tenants must have spent at least three years in any council property and have been at the most previous recent property for at least a year. Tenants can also buy the property with their partner, another tenant, or up to three family members who have lived in the property for at least 12 months.

The discount rate depends on the type of council property and how long the customer has lived in the council home. After the tenant has been in a council property for 3 years, they can qualify for a 35% Right to Buy discount. Every five years, this discount increases by 1%, with the maximum discount being 70%, which can be reached after 40 years. Rates can vary on the type of property and region.

There are several things to consider when using the Right to Buy scheme to buy a council property.

Like with any property, if the tenant fails to keep up with the mortgage repayments once they buy the home, it can be repossessed. Once the council property has been purchased, the homeowner will also be required to carry out any maintenance and upkeep of the property, rather than the council.

If a tenant buys a home through the Right to Buy scheme and sells the home within five years, they will also be required to repay some or all of the discount. The value of the property could also decrease, making it difficult for the homeowner to sell the property in future. Any housing benefits will also halt once a person becomes a homeowner.

Even once a customer owns a council property, they cannot control whether the council demolish the building. The council have the right to buy back the property, and force the owner to move out and demolish it.

Before you apply

Did you know you:

  • Must be at least 18 years old to apply for a mortgage

  • Can apply for a mortgage on your own, even for a joint mortgage application

  • Can get an agreement in principle before you've found the place you want to buy

  • Lending limits are subject to the availability of suitable products at any given time and the ability to undertake either an Automated or Desktop Valuation whilst it is not possible for valuers to gain access to properties

How to apply

We need to talk you through your mortgage application, and this can be done by booking an appointment with one of our qualified Mortgage Advisers. Did you know you can now talk to us in a branch, over the phone or via a video appointment? You can request a call back online.

You'll need to have the following details to hand:

  • Your last three months' payslips
  • Your last three months' bank statements if you want any other income to be considered (for example rental or investments) and as a reminder of your outgoings
  • If you already have an existing mortgage elsewhere, your last year's mortgage statements
  • If you're self-employed, minimum 2 years’ finalised figures
  • If your mortgage is to extend past your stated or state retirement age, up-to-date forecasts for any state, company and personal pensions
  • And, if you've already got your heart set on a property, bring along the sales particulars
  • Details of any loans you currently hold, including student loans and car payments

How to apply

Request a callback

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Request a call back from a Mortgage Expert who can arrange a convenient time to discuss your mortgage needs, or you can get in touch via our live chat facility.

How to apply

Talk to us

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To talk to us about a new mortgage, call us on 0800 056 1088. Lines are open Monday to Friday 8am to 8pm and 9am to 2pm on Saturday.

Important information

Lending is subject to status and lending criteria, UK resident and 18+.

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