With the credit crunch all around us, it is getting harder and harder for first time buyers to get on the property ladder. Because the market is just as hard on developers many are introducing schemes to help people get their own home, with the benefit for both sides.

Nowadays in the UK there are many reasons for the property market stalling. Some of which can be attributed to:

  • Stamp duty confusion
  • Problems with saving up a deposit
  • Banks rejecting many mortgage applications
  • High house prices

Shared ownership

The advantage of shared ownership schemes is mainly the fact that because you are only buying a percentage of the house, you only need a mortgage for that amount. This could bring a previously too expensive property to an affordable level.

However, many such schemes have plenty restrictions – for example not being able to buy out the whole property, the need for working or living in a specific area, age limits and so on. On top of that you still have to pay rent on the outstanding percentage. This coupled with your mortgage payments might prove to be more that you wished for.

Benefits of shared ownership, without the drawbacks

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Seeing an opportunity to snatch some of the first time buyer market, developers started offering schemes similar to the shared ownership, but with some extra advantages. One of these helpful plans comes from Crest Nicholson, under the name of the EasyBuy scheme.

So what makes it different from a shared ownership scheme?

  • You own 100% of the property – no need to pay extra rent, or worry about whether or not you will be able to buy out your home when you want to
  • They pay for legal fees up to a certain amount – this is available if you use their suggested solicitors, for the Q2 development in Reading, this was about £900
  • No stamp duty - you do not need to pay any stamp duty, or even worry whether it applies to your or not
  • No area restrictions - you do not have to live or work in the area to be accepted, nor do you need to be of certain age
  • First time buyers only - as the scheme is supposed to help people get on the property ladder, only first time buyers can apply
  • Mortgage arrangement fee paid for you - again, if you use the recommended mortgage advisor, you can have your fees paid for you
  • 5 years interest free, and another five at a low percent - the outstanding 25% is given as a interest free loan for the first five years, and followed by another 5 years at a low percentage (for the Q2 development it was around 3%)
  • No early repayment restrictions - you can pay off the outstanding 25% any time you want, as long as it is before the 10 years are up.

Little extras for your home

On top of all the financial advantages, when buying an apartment from the Q2 Reading development via the EasyBuy scheme you qualify for several small bonuses. Knowing how hard it is to buy your new home and then finish it off when you move in Crest Nicholson have included several items in the price for the first time buyers using their scheme.

To start you off and take away the hassle you will be provided with standard lighting in all the rooms and bathrooms. Also the buyers will have a choice from a range of blinds or curtains that will be fitted in their new home. Lastly bedrooms and hallways will be carpeted under the EasyBuy scheme, without the need for an extra payment.

Where’s the downside?

If it all looks too good to be true, you might be right. There are drawbacks to buying under such a scheme. To start with, it might tempt you to go for something you will not be able to afford.

The trick here is to save monthly towards the outstanding 25% during the interest free years. A nice idea would be to go for an offset mortgage, which would allow the money to work twice as hard while you are saving.

The above is extremely important, as not many people can afford to pay back tenths of thousands in a short period of time. And if you leave it for too long by thinking you still have time to start saving, you might just end up in such a situation.

Also because it is a loan you take up for the outstanding 25%, you might have a limited selection of mortgages to choose from, as not all banks might feel secure enough to lend you the money.

However overall the concept is quite interesting, and shows how the market is changing. As long as you do your numbers beforehand it might turn out to be a neat solution that can save you money in the long run and give you your dream home today.

As I am myself a first time buyer at the Q2 development, you can follow the progress of the build by checking out my “build diary” with details about the apartments and photos from the site.