Shared Ownership v HTB Equity Loan

CrunchThisDebt

In short, if you had to chose one, which one would you choose to help you get on the property ladder? 

In long, we are a family of four renting and wanting to get on the property ladder. In our area there is a mass of new builds happening which will grow the town by a quarter. With both types of schemes we will potentially be gifted some of the deposit that we will plan to repay at a later date, anyway...

Would you by a shared ownership house with the plan to eventually by more shares in the house and then owning the house eventually (house isn’t available until Feb 22). Or use the HTB Equity loan to by house next year....we need to go to the maximum of the mortgage and maximum of loan with a 5% deposit to get a house that is Suitable for us. (Three usable bedrooms). 

One more question, how will the HTB scheme change in April2021 for us if we are looking to use the HTB scheme on a £280,000 house. 

Any replies will be helpful :-). Thank you for taking the time to read my dilemma. 

wjr4

If you can afford a house using the HTB equity loan, you probably don’t need to use shared ownership. I used shared ownership because I couldn’t afford a suitable property, even with the equity loan. 

CrunchThisDebt

Sorry, I don’t think I was clear enough. To buy your first house would you use shared ownership scheme or HTB equity loan? 

firsttimesellerldn

I bought a flat with a HTB loan and was much happier to be able to do that than buy shared ownership, although I was buying in London so was able to borrow 40%. Have you worked out how much each would cost? Obviously with shared ownership you have to pay rent on the portion you don’t own, whereas HTB is interest free for five years. 

annetheman

It would depend on my circumstances. Ideally, I wouldn't use either and buy a freehold, but I can't in my region. So I'd use HTB equity loan to buy a house but can't in my region. So I'm using Shared Ownership but wouldn't if I could move out of my region (cannot due to circumstance).
Last resort, I would continue renting but I've spent circa £60,000 on rent in 4 years.

The ultimate dream would be to build a beachside mansion in Zanzibar. Do what is best for YOU! Plenty will advise you not to use HTB or go near leasehold with a barge pole but spending thousands more for years paying an assured shorthold tenancy may be a worse option for you. Understand these schemes - inside and out, every aspect. Know what the pitfalls are, know your long-term plan and know what you're signing, is all.

kingstreet

£280,000 is above the cap for several areas on the HTB scheme post-April '21. You will be okay if you are buying in East, SE, SW or London. The cap is lower than that in NE, NW, EM, WM, Yorks/Humber. 

DCFC79

Speak to a broker, they will talk through your options.

SandyShores

Help to Buy Equity Loan for sure.  We just bought a house in the summer with a 5% deposit so we have the maximum equity loan of 20%.

My daughter has been looking at shared ownership.  I think she was looking at a scheme where you couldn't buy 100% so you would always be paying rent.  You could also only sell to people who were eligible for shared ownership and we thought that might make it difficult to sell in a timescale as your buyers would be fewer.  She decided against Shared Ownership in the end and will use the HTB EL.  We aren't totally against Shared Ownership but I would just check that you can eventually own 100% if that is your aim.  

I think both schemes are the same in terms of having to have a revaluation and solicitors fees each time you buy a bigger share/pay off some of the loan.  But we are planning to use the five year interest free period and then remortgage in year 5 to pay the whole thing off.  Just hoping the value of houses doesn't rise hugely in five years as our Equity Loan will also rise (i.e. 20% of value at that time).  But its all relative and has allowed us to buy a lovely house.  We're planning to start making overpayments in the Spring, so in five years we should have good equity in the house to be able to remortgage with the loan and still get a good rate.

The builder we bought our house from also has properties at 30% discount.  I think its something arranged with the local council.  You own 100% of the home, but when you come to sell it you have to do so at 30% discount on market rate.  I think that's a really good idea especially if you are planning for it to be your forever home.

70Jenny2184

If you can get the HTB loan I think it's definitely the better option even without plugging the numbers I prefer the idea of fully owning rather than part renting.  If you do look at the numbers though, the interest rates are not great for SO and a 75% share would be much more expensive monthly for the same house than a 75% LTV mortgage with the HTB loan. 

wjr4

CrunchThisDebt said:

Sorry, I don’t think I was clear enough. To buy your first house would you use shared ownership scheme or HTB equity loan? 

Most people who use shared ownership cannot afford a house using the help to buy equity loan. They simply cannot get a mortgage for the amount needed, that’s why they use shared ownership. 

HanPop

We have done both, bought our first house with shared ownership and our second with the equity loan.
You need to check what the regional cap is for the equity loan in your area from next April. 

Both schemes have suited us well but I would probably go for the equity loan if you can as you get to pick the house type that suits you best (within budget obviously) whereas with shared ownership it’s the smaller house types they tend to be on and a limited number of them