Topic 25: Schemes for specific groups of borrower Flashcards
What is shared ownership?
An arrangement offered by providers such as housing associations. The buyer initially buys a share of the property, with a deposit and a conventional mortgage, and the provider retains the remaining share. The new owner pays rent to the provider on the retained part. The owner has the right to buy further shares of the property up to 100%.
What is Staircasing?
When the owner of a shared ownership property buys further shares in the property. The cost of the share will be based on the market value of the property at the time, with a minimum value determined by the lender.
What is Equity share?
The borrower buys a share in the property from a provider (lender or developer) with a deposit and a conventional mortgage, and the provider holds the balance as an equity share through a second charge. An example would be 80% to 20%. The provider does not charge rent on their share, but if the owner sells the property the provider will receive 20% of the sale price.
What is Help to Buy Equity Loan (England)?
A government-sponsored shared equity scheme in England to help those buying a new-build property up to a specified purchase price. The government provides an equity loan of between 10% and 20% of the purchase price for a maximum of 25 years, with an annual fee charged from the start of year six. This scheme closed for applications in October 2022.
What is Help to Buy Equity Loan (Wales)?
Similar to the Help to Buy Equity Loan (England) scheme that is available until April 2025.
What is Help to Buy (Scotland)?
Available to those who could not otherwise afford to buy a property, and applied to new-build property from participating builders. This scheme is now closed.
What is Open market shared equity scheme (Scotland)?
Helps low to moderate earners buy open market starter homes. The Scottish government provides an equity loan of between 10% and 40% of the purchase price.
What is Right to buy (England, Wales and Northern Ireland)?
Secure tenants of social landlords gain the right to buy the property at a discount to its market value after three years of tenancy. The initial discount after three to five years’ tenancy is 35% for houses and 50% for flats, with further discounts added for each subsequent year of tenancy. The maximum discount is 70%, with monetary limits also applying depending on location.
What is Lifetime mortgage (interest roll-up)?
Interest charged is rolled up with the capital and no monthly payments are made. The accumulated debt is repaid at the end.
What is Lifetime mortgage (drawdown)?
The lender agrees a maximum lending limit, and the borrower can draw down funds up to the limit as and when they wish. Interest is charged on the amount borrowed rather than the maximum amount available, and rolled up with the capital. Drawdown can result in lower interest charges overall.
