Right to Buy or Shared Ownership?

It’s been a very busy week in the mortgage market.  Lots of rate volatility as lenders long term fixed rates begin to creep up, along with many delays across the market as lenders struggle to cope with rising volumes as people snap up great rates before they increase!  Unfortunately, it also means that some funding levels are being fully utilised and one such example is with our good friends at the Saffron Building Society who have shut their doors temporarily for this exact reason.  They follow a number of lenders who temporarily suspended lending in early August.  But we hope to see them return in the autumn with a great new range of products for 2014.

Many lenders are looking for niches in the market and two such examples are Right to Buys and Shared Ownership schemes.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price. This discount can be up to £75k and tenants must have been with the council for five years or more. Some lenders will allow borrowing of up to 100% and possibly slightly more if the extra funds are to be used purely for home improvements. If you resell your home within five years you will usually have to repay some, or all, of the discount you received, however remortgaging is usually allowed in this time period. This is covered under the term Pre-emption Clause.

Shared Ownership Schemes are provided through housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, so always seek advice.  Especially as some of these lenders are not household names.  This should not deter you though as these lenders have a good funding arm and an appetite to lend!