Expert Advice Affordable homes

Spare a thought for unfortunate first time property buyers. Against all the odds, residential property values are increasing once again.

The fact that prices are generally improving is disappointing for those who hoped that the recent market slump would bring the price of buying a new home within their grasp. Yet, despite some speculation of a short-term market slowdown in 2010, various factors point to further medium to long-term capital growth.

Knight Frank, the estate agent, project that by 2014, average UK prices will be 19% higher than today while in London the typical gain will be 38%.

Furthermore, a reduction in the number of mortgage products available to first time buyers without a sizeable - typically 25% - deposit, is making it even harder to get a foot on the property ladder. However, there is help at hand. Here What House? highlights some of the options available.

Buying an affordable home - a guide

There are a number of private and government backed shared ownership and shared equity schemes available to assist people in their attempts to buy an affordable home.

New house developers, housing associations and councils all offer cheap homes to those seeking their first step on the housing ladder, through various schemes including, New Build HomeBuy, HomeBuy Direct, First Time Buyer Initiative and Rent to HomeBuy, among others.

Currently, financial support is only available on new homes, which helps to maintain new home build activity and keep new home builders in employment.

Who is eligible to buy a cheap home?

Anyone who earns under £60,000 per year is theoretically entitled to financial assistance in buying a new affordable home, which represents around 90% of all people in Britain, according to additional research conducted by Knight Frank.

In reality, priority is given to people on council housing waiting lists, key workers, first-time buyers, and those who can clearly show that they have been priced out of buying an appropriate home in their local area. A decent credit history is also an important prerequisite.

NewBuild HomeBuy - Shared Ownership

The shared ownership scheme, NewBuild HomeBuy, is typically operated by housing associations, who allow people to buy a minimum percentage of 25% of a new home then pay discounted rent on the housing association's share of the property.

Buyers are permitted to purchase shares, up to 100% of the property's value. The buyer is also allowed to sell the home at any time.  

Rent to Homebuy

Rent to HomeBuy, introduced earlier this year, is an alternative option available. It allows people to pay a subsidised rent on a new home to a housing association. After a couple of years the tenant will receive a percentage of the rent back in order to put towards a deposit to buy the new home, under the terms of the NewBuild HomeBuy scheme.

Despite the help on hand, recent research from affordable housing provider, Circle Anglia, shows that an astonishing 90% of all prospective first time buyers remain oblivious to the fact that shared ownership housing schemes, which permit people to buy as little as 25% part ownership of a home, even exist.

HomeBuy Direct - Shared equity

HomeBuy Direct, the shared equity model, introduced last year, is a popular option because this is where a new home developer or housing association will lend the purchaser the necessary finance - up to 30% - required to pay for the deposit on a new home build, in the form of an equity loan. This then opens the path for the buyer to borrow the rest of the money - a minimum of 70% - from a mortgage lender, a much larger share than when buying under the NewBuild HomeBuy scheme. However, the equity loan will have to be repaid, subject to the vendor's rate of interest.

Nevertheless, the purchaser owns the title deed to the whole property is entited to buy further shares in their new home and can sell on the open market at any time, although any profit made must be split with the vendor who provided the initial loan.

First Time Buyers' Initiative

First-time buyers can generally take part in the First Time Buyers' Initiative in order to help them buy a new home.

This option is generally offered by new home developers on selected new homes.

First-time buyers can generally buy a brand new home with a mortgage for at least 50% of the property's value, with the remainder of the purchase price financed through a shared equity loan provided by the government.

Under the terms of the terms of the First Time Buyers' Initiative, no interest is charged for the first three years of the loan. After three years there is a fee of 1% charged, rising to a maximum of 3% after owning the property for five years.

Just like the NewBuild HomeBuy and HomeBuy Direct schemes, the First Time Buyers' Initiative offers homeowners the opportunity to acquire additional shares at a later date - at current market value - until they own the property in its entirety.

Participants in the scheme are also allowed to sell their property at any time as long as the equity loan is repaid, subject to the market value at the time of sale.

The First Time Buyers' Initiative is only available on certain new home build developments, many of which are listed on WhatHouse.co.uk.

In fact, many of the homes available under all these schemes - NewBuild HomeBuy, Rent to Homebuy, HomeBuy Direct schemes and First Time Buyers' Initiative are listed with What House?

Finding an affordable home

Whether searching for a new house or a new flat, one of the best ways to find a new home to buy is by searching online. www.whathouse.co.uk offers tens of thousands of new affordable homes for sale at a vast range of prices, on behalf of new home builders, estate agents and housing associations across the country.