1. Introduction
Getting onto the property ladder in the UK is no small feat, especially for first-time buyers facing rising house prices and hefty deposit requirements. Many people find themselves stuck between soaring rents and the dream of owning a home, making it essential to explore every available option. To address these challenges, the government has introduced schemes like Help to Buy and Shared Ownership, both designed to make home ownership more achievable for those struggling with affordability. While each scheme has its own set of rules and benefits, they share a common goal: helping you take that all-important first step towards owning your own place. In this article, we’ll compare Help to Buy and Shared Ownership, breaking down how each scheme works and who might benefit most—so you can decide which path best suits your circumstances.
2. What is Help to Buy?
The Help to Buy scheme, specifically the Help to Buy Equity Loan, was designed by the UK government to help first-time buyers get onto the property ladder in England. This scheme made it easier for people with smaller deposits to buy a new-build home by offering an equity loan alongside their mortgage. Although applications for new Help to Buy Equity Loans closed in October 2022, understanding how it worked is still important if you’re comparing homeownership options like Shared Ownership.
How the Help to Buy Equity Loan Works
With Help to Buy, you could borrow up to 20% of the cost of a newly built home (or 40% in London) from the government. Buyers needed at least a 5% deposit and took out a mortgage for the remaining amount. Here’s a typical example:
| Property Value | Buyers Deposit (5%) | Equity Loan (20%) | Mortgage (75%) |
|---|---|---|---|
| £300,000 | £15,000 | £60,000 | £225,000 |
Eligibility Requirements
- You must be a first-time buyer purchasing a new-build home.
- The property must fall within regional price caps (e.g., £600,000 in London).
- You cannot own any other property at the time of purchase.
- The home must be your only residence.
- Applications for new equity loans are now closed, but previous applicants continue under their original terms.
Key Features and Typical Costs
- The equity loan is interest-free for the first five years; after that, you pay an annual fee of 1.75% on the loans value, rising each year with inflation.
- You must repay the same percentage of your homes market value when you sell or at the end of your mortgage term — not just the original loan amount.
- You can repay part or all of your equity loan at any time (minimum 10% of your homes current value per repayment).
- The scheme was only available on new-build homes from registered developers.
- You still needed to pass standard affordability checks with your chosen lender for the mortgage part.
If you’re weighing up whether Help to Buy or Shared Ownership would have been better for you, consider factors like total costs over time, flexibility to move or staircase ownership, and eligibility rules. While Help to Buy offered a clear route for those with limited deposits but steady income, its focus on new builds and eventual repayment requirements may not suit everyone’s long-term financial plans or desire for flexibility.
3. Understanding Shared Ownership
The Shared Ownership scheme is a popular route onto the property ladder for many first-time buyers in the UK, especially those who might struggle to afford a home on the open market. With Shared Ownership, you purchase a share of a property—typically between 25% and 75%—and pay rent on the remaining portion owned by a housing association.
How Does Shared Ownership Work?
Once you’ve decided how much of the property you can afford to buy, you’ll need a mortgage for that share and a deposit, usually around 5-10% of the share’s value. The rest of the home remains under the ownership of the housing association, to whom you pay a subsidised rent each month. Over time, if your financial situation improves, you have the option to buy further shares in your home through a process known as ‘staircasing’, eventually allowing you to own 100% of the property if you wish.
Who Qualifies for Shared Ownership?
Shared Ownership is generally aimed at first-time buyers or those who do not currently own another property. To be eligible, your household income must typically be less than £80,000 per year (or £90,000 in London). It’s designed for people who would otherwise struggle to purchase a suitable home outright on the open market.
Fees and Ongoing Costs
While Shared Ownership can make buying more accessible, there are costs to keep in mind beyond your mortgage and rent. You’ll still need to budget for service charges, ground rent (if applicable), and maintenance costs. There may also be fees associated with increasing your share later on or selling your property. It’s important to factor these ongoing expenses into your monthly budgeting to ensure Shared Ownership remains affordable in the long run.
4. Comparing the Two Schemes
When deciding between Help to Buy and Shared Ownership, it’s important for first-time buyers and local renters in the UK to understand how each scheme works, along with their respective pros, cons, and key differences. Below is a side-by-side comparison to help you make an informed decision.
| Help to Buy | Shared Ownership | |
|---|---|---|
| Eligibility | Available to first-time buyers purchasing new-build homes up to a set price cap (varies by region). | Open to first-time buyers and previous homeowners with household income below £80,000 (£90,000 in London). |
| Deposit Required | Minimum 5% of property value. | Typically 5-10% of your share, not the full property value. |
| Ownership Structure | You own 100% of your home (with an equity loan from the government). | You buy a share (usually 25%-75%) and pay rent on the remaining portion owned by a housing association. |
| Government Support | Equity loan up to 20% (40% in London) of property value, interest-free for 5 years. | No direct loan; instead, subsidised rent on unowned share. |
| Monthly Payments | Mortgage repayments plus any equity loan interest (after year five). | Mortgage repayments on owned share plus rent on the remainder. |
| Staircasing Option | N/A – you already own 100%. | You can buy more shares later (“staircasing”) until you own outright. |
| Property Types | New-build homes only. | Mainly new builds but some resale shared ownership properties available. |
| Exit Process | Sell the property on the open market; repay equity loan from sale proceeds. | Selling must go through housing association first; may be restrictions or waiting periods. |
Pros and Cons at a Glance
| Help to Buy Pros | Help to Buy Cons | Shared Ownership Pros | Shared Ownership Cons | |
|---|---|---|---|---|
| – Lower deposit needed – Interest-free government loan for 5 years – Full ownership from day one |
– Only available for new builds – Limited regional price caps – Must repay government loan after sale or after 25 years |
– Smaller deposit as percentage of share – Opportunity to increase ownership over time – Lower initial monthly costs |
– Pay rent in addition to mortgage – Extra fees (e.g., service charge) – Restrictions when selling or subletting |
Key Differences Relevant to First-Time Buyers and Renters
If you want full ownership immediately and plan to stay put for at least five years, Help to Buy may suit you best—especially if you can comfortably manage repayments once the interest-free period ends. On the other hand, Shared Ownership can be a lifeline if your savings are limited and you’re happy with gradual ownership while keeping monthly costs manageable. For renters in high-demand areas like London, Shared Ownership might offer more affordable entry points given rising house prices and rental costs. Ultimately, your choice will depend on your financial situation, long-term goals, and preferred level of flexibility.
5. Financial Considerations and Saving Tips
When weighing up Help to Buy versus Shared Ownership, getting your finances in order is key. Both schemes have different requirements when it comes to deposits, monthly repayments, and extra costs, so it’s important to budget carefully and make the most of every pound.
Mortgage Insights: What to Expect
With Help to Buy, you’ll need at least a 5% deposit on a new-build property, with the government providing an equity loan for up to 20% (or 40% in London). This means your mortgage will cover the remaining percentage. For Shared Ownership, the deposit is usually based on the share you’re buying—often between 25% and 75% of the property’s value—which can make the upfront cost lower, but you’ll also pay rent on the remaining share owned by the housing association.
Budgeting for Deposits and Repayments
Set a realistic savings goal for your deposit by reviewing your income and outgoings. With Help to Buy, factor in how your mortgage repayments might increase when the interest-free period on the government loan ends after five years. For Shared Ownership, remember that both your mortgage and rent may go up over time—plan ahead by building a buffer into your budget for potential increases.
Hidden Costs: Don’t Get Caught Out
Both schemes come with additional costs beyond just deposit and repayments. Think legal fees, valuation charges, stamp duty (where applicable), and moving expenses. If you’re buying through Shared Ownership, there may be service charges or ground rent as well. To avoid surprises, create a checklist of all possible expenses and shop around for deals on solicitors and removal services.
Practical Money-Saving Advice
If you’re struggling to save for a deposit, consider setting up a dedicated Lifetime ISA (LISA), which lets first-time buyers save up to £4,000 a year with a 25% government bonus. Cut back on non-essentials like takeaways or unused subscriptions, and hunt down supermarket deals to keep grocery bills low. Every little helps when you’re working towards your dream home.
In summary, whether you choose Help to Buy or Shared Ownership, careful planning and savvy saving will set you up for success. Compare your options thoroughly, use budgeting tools tailored for UK buyers, and don’t be afraid to ask lenders or housing associations for advice on keeping costs manageable.
6. Which Scheme is Right for You?
Questions to Ask Yourself
Before deciding between Help to Buy and Shared Ownership, it’s important to reflect on your personal circumstances. Ask yourself: How much deposit can I realistically save? Am I comfortable with taking on a larger mortgage or would sharing ownership reduce my financial pressure? What are my long-term goals—do I want to own 100% of my home eventually, or is stepping onto the property ladder the main priority for now?
Lifestyle Considerations
Think about your lifestyle and future plans. If you’re looking for flexibility and may wish to move in a few years, Help to Buy might make more sense, especially since selling can be simpler without another party involved. On the other hand, Shared Ownership could appeal if you want lower initial costs and are happy living in a new build or specific developments. Consider how each scheme aligns with your job stability, family plans, and willingness to take on homeownership responsibilities.
Assessing Your Financial Goals
Review your budget carefully—factor in monthly repayments, rent (if applicable), service charges, and potential changes in interest rates. Do you plan to increase your stake in your home over time (“staircasing”) or is your priority keeping monthly outgoings as low as possible? Make sure to account for all fees and ongoing costs so there are no surprises down the line.
Tips for Deciding
- Speak with an independent mortgage advisor who understands both schemes and the local property market.
- Visit different developments and talk to current residents about their experiences.
- List the pros and cons of each option based on your priorities—such as location, costs, and future flexibility.
Ultimately, choosing between Help to Buy and Shared Ownership comes down to what works best for your budget, lifestyle, and future plans. Take your time weighing up these factors before making your decision.
7. Conclusion & Useful Resources
Deciding between Help to Buy and Shared Ownership can feel overwhelming, but taking the time to compare both schemes against your personal circumstances is a smart financial move. Both options offer a helping hand onto the property ladder, but they work differently when it comes to deposit requirements, ownership structure, and long-term costs. Remember to weigh up factors like your budget, location, future plans, and eligibility criteria before making a decision.
For the most up-to-date information and detailed guidance, its wise to turn to official resources. The UK government’s Affordable Home Ownership Schemes page provides comprehensive overviews of both Help to Buy and Shared Ownership. If you’d prefer tailored advice, many local councils and housing associations offer free support—just search for your local authority’s housing advice service online. For independent guidance, consider reaching out to organisations like Citizens Advice or the MoneyHelper service.
Whichever scheme you choose, make sure you understand all the terms and potential costs involved. Taking the time now to do your homework can save you money in the long run—and help you secure a place you can truly call home.
