Best new-build homes to buy with a deposit under £10,000 through shared ownership
WANNABE homeowners struggling to raise a deposit may want to consider shared ownership where you can get on the ladder for less than £10,000.
Shared ownership lets buyers in England and Wales purchase a portion of the equity in a property if they can’t afford to take out a mortgage for the total value of the home.
You co-own your home with a housing association, which will charge you rent on its portion of the property.
Currently, you must purchase between 25% and 75% of the property to use the initiative, and you can then “staircase” – buy more shares in instalments – until you own 100% of it.
The minimum amount you can staircase varies depending on what is outlined in the lease but it’s typically between 5% and 10%.
But the scheme is being revamped from the start of next year, which will see the minimum amount of shares home buyers must purchase reduced to 10% and staircasing intervals reduced to 1%.
What to watch out for with shared ownership
SHARED ownership is a government scheme designed to help those struggling to put together a deposit get onto the property ladder. There are a couple of points to watch out for though:
You must meet certain eligibility criteria
You can buy a home through shared ownership if your household earns £80,000 a year or less outside of London, or £90,000 a year or less in London, and any of the following apply:
- you’re a first-time buyer
- you used to own a home, but cannot afford to buy one now
- you’re an existing shared owner
You can end up paying more to staircase
If you later want to buy more of your property – known as staircasing – it’s worth bearing in mind that this is based on the property’s value at the time, so you’ll pay more if house prices go up.
But it also means you’ll pay less if house prices fall.
You will have to pay legal fees and stamp duty tax – if applicable – every time you staircase yoo, which could end up costing you more in the long run.
We previously spoke to a first-time buyer who ended up paying the tax three times after purchasing her shared ownership flat.
The housing association has first dibs on any sale
One of the other issues with shared ownership is that you don’t have as much freedom when it comes to selling your home compared to if you hadn’t used the scheme.
If you own less than 100%, your housing association will get a set period of time to find a buyer, meaning you won’t be able to accept a higher offer from someone else.
Many shared ownership leases also contain a clause that gives the housing association dibs on buying it back before offering it on the market.
If they don’t want it, you can sell it to whomever you want to.
For hopeful homeowners struggling to save, the benefit of this scheme is you only have to put down a deposit on the proportion you own, and you can take out a mortgage for the rest.
Of course, the smaller your deposit the higher your mortgage repayments will be, and the longer it will take you to pay off your mortgage – meaning you’ll be building up more in interest in the long-run.
You also don’t have to be a first-time buyer, although the scheme is reserved for specific properties and there are some catches to watch out for – see the box above for more information.
It’s worth pointing out that there are also different shared ownership rules in Northern Ireland and Scotland.
If you’ve done your research on property schemes and decided this is the best one for you, Zoopla has rounded-up some potential properties below that you could get with a deposit of less than £10,000.
Use a property portal, such as Rightmove or Zoopla, to find similar homes in your area.
Don’t forget stamp duty has also been waived for all property purchases up to £500,000 in England and Northern Ireland until March 31, 2021.
One-bed flat, Waterlooville, Hampshire
- Total property price: £170,000. Minimum shared ownership property price: £68,000 (40%). Minimum deposit: £3,400 (5%) – view online
This one-bed flat is available with just a £3,400 deposit, as long as you can get a mortgage on the remaining £64,600.
In this scenario, the housing association will own the other £102,000, which means monthly rent payments of £226, plus a £48 a month service charge on top.
The Berewood development home has one bedroom, one bathroom and a separate lounge and kitchen but there’s no outside space.
It also comes with allocated parking.
One-bed flat, Southall, London
- Total property price: Not listed. Minimum shared ownership property price: £80,000 (unclear what %). Minimum deposit: £4,000 (5%) – view online
Unfortunately, this one-bed property listing doesn’t detail the minimum amount the housing association owns or how much rent you’d pay.
It does, however, confirm that you can purchase it with a minimum 5% deposit, which would be £4,000 based on owning £80,000’s worth. You’d therefore need to take out at least a £75,000 mortgage.
You also need to stump up the cost of six month’s worth of service charges in advance, although the listing doesn’t detail what the service charge is.
The property has one bathroom and a private balcony.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
Two-bed terrace, Bridgwater, Somerset
- Total property price: £210,000. Minimum shared ownership property price: £84,000 (40%). Minimum deposit: £4,200 (5%) – view online
You need less than a £5,000 deposit to secure this Taylor Wimpey two-bed property in Somerset.
Using shared ownership, you could put down a minimum deposit of £4,200 and take out a mortgage for the remaining £79,800.
A local housing association then owns the remaining £126,000, which you would pay rent on until you’ve saved up some more cash to staircase up.
Monthly rent at this level would set you back £288.75, plus there’s a £60 a month service charge on top.
The house itself has one bathroom and a separate cloakroom, as well as a garden, plus an allocated parking space.
Two-bed terrace, Cheltenham, Gloucestershire
- Total property price: £250,000. Minimum shared ownership property price: £100,000 (40%). Minimum deposit: £5,000 (5%) – view online
This house in Cheltenham can also be snapped up with just a 5% deposit of £5,000. You would take out a mortgage on £95,000 with the housing association owning the remaining £150,000, which you would pay rent on.
On this basis, rent would set you back £343.75 a month, plus a service charge of £41.65 a month on top.
The property itself has two double bedrooms both with an en-suite, plus a separate cloakroom downstairs. There’s also a back garden and off-road parking.
Two-bed flat, Kingsway, Hove
- Total property price: £470,000. Minimum shared ownership property price: £117,500 (25%). Minimum deposit: £5,870 (5%) – view online
This flat is at the pricier end of the spectrum compared to others we’ve listed as the minimum share you can buy is a smaller 25%, which in turn means your rent will be higher as the housing association owns more.
So, say you put down a £5,870 deposit, you’ll get a mortgage for £111,630 and the housing association will own £352,500, which makes your monthly mortgage £808. There’s also a £192 a month service charge on top.
The flat itself has two bedrooms, two bathrooms, and a private balcony with sea views.
more on mortgages
If you’re thinking of using one of these schemes, use a mortgage broker to help you find the best deal. Free mortgage brokers include London and Country and Trussle.
Also see our first-time buyer guide to getting a mortgage.
And here are the best mortgages for first-time buyers.