So you have qualified for an affordable housing scheme. If you think the hard part is over, think again. You still have to get a mortgage. “This is a very complex area,” says Richard Morea of London & Country, the mortgage broker. “There are so many schemes, and this, coupled with different approaches from the various lenders, makes it difficult for people who qualify to figure out which is the option for them.”

For starters, the mortgage market is fairly restricted. Some local building societies offer loans for affordable schemes, usually focusing on those in the immediate area. But there are only a few banks and building societies offering mortgages on affordable properties nationally; HBOS, Abbey, Woolwich, HSBC and Leeds Building Society are among the big lenders. But not all lenders will lend on all affordable properties: in some cases, local councils impose restrictions. They may insist, for example, that homes are never sold for more than a set multiple of the average local income, and this may deter lenders from offering loans on these properties.

Then there is the divide between shared ownership schemes such as NewBuild HomeBuy and shared equity schemes such as HomeBuy Direct. “There are two distinct areas of funding, depending on whether you are looking at shared ownership or shared equity,” says Richard Stone of SPF Sherwins, a mortgage broker specialising in financing affordable housing. Not all lenders will offer mortgages for both: Abbey, for example, will not lend on a shared equity basis, but it will lend on a shared ownership scheme such asIssigonis House, an eco-conscious development in Acton, West London. Here, a 25 per cent share in a two-bed apartment through Shepherds Bush Housing Association, would cost from £80,000.

Some lenders will offer their standard mortgage range to people purchasing affordable housing, but there is an increasing trend towards offering affordable borrowers a more restricted — and more expensive — range of loans. For many buyers this has resulted in them having to curb their ambitions. Andrea Keniston, 36, a fashion buyer, is thrilled with her 25 per cent shared ownership deal in an apartment at Horizons, in Brixton, South London, but anything more substantial would have been out of the question. She says: “In the current climate, I would not have been able to afford the hefty deposits which are being demanded.”

Buyers who buy through shared ownership must be prepared to pay rent on top of their mortgage payments. If you purchase a 40 per cent share of a property under NewBuild HomeBuy shared ownership terms, you will pay 60 per cent of what would be the market rent to a housing association. In pre-credit crunch days many of the mortgages on offer were for 95 to 100 per cent of the value of the share.

“Most lenders offer 75 to 80 per cent now,” Stone says. The amount of money you are able to borrow will generally be lower than with a traditional mortgage because of the rent that must be paid.

The HomeBuy Direct shared equity scheme has similar problems. Some lenders, including Halifax and Nationwide, now ask for a deposit when they lend on a shared equity basis. Royal Bank of Scotland is one of the few that lends 100 per cent of the purchaser’s share.

One advantage of buying on this basis is that you may qualify for better rates. If you are borrowing 95 per cent of a 70 per cent share in the property, the lender will usually base the loan-to-value (LTV) calculation on the total value of the property, meaning that you would qualify for the same rate as someone who is borrowing just 66 per cent LTV.

While brokers insist that it is no more difficult to get affordable funding than it was a couple of years ago, the disappearance of high LTV mortgages has changed the market. “The affordable market used to be driven by 95 to 100 per cent funding and that is no longer available,” Stone says.

It is possible to buy an affordable home without taking out a mortgage. Assettrust Housing is a private company selling affordable properties. It offers a minimum purchaser’s share of only 12.5 per cent, so if you have a deposit of that amount, you could avoid the need for mortgage finance. “Because many lenders are asking for a 20 to 30 per cent deposit, we are finding that more and more people are buying on a cash basis,” says David Orchin, sales and marketing director for Assettrust Housing. “Some people may just want to delay getting into the mortgage market until rates have improved.”

Assettrust has a range of properties on offer, including schemes in Wakefield, Hitchin, and the Waterside in Worcester, built by Berkeley Homes. A 12.5 per cent share in a one-bedroom flat here costs £19,994 (the full price is £159,950). The internal specification, which has Villeroy and Boch appliances, is identical to that of the “non-affordable” properties within the same development.

Stumped by staircasing? Bewildered by HomeBuy? How to crack property jargon:

Shared ownership or shared tenure is any product, such as NewBuild HomeBuy, which allows an individual to split ownership of a property with a housing association or private organisation.

Shared equity is any product, such as HomeBuy Direct, which allows an individual to buy a property by way of two loans: a mortgage and an equity loan. The buyer does not own the property in conjunction with any other party — he or she is the only person on the deeds and there is no co-owner.

HomeBuy agents manage the register of people interested in affordable housing. They assess eligibility and provide details of relevant schemes. They are the first port of call for anyone who wants to find out about affordable housing.

Staircasing is when owners of affordable properties increase their share in the ownership of their home. Additional shares can be purchased all the way up to 100 per cent. The cost is based on the market value of the property at the time that you purchase the shares. If you increase your share in the property, your rent is re-calculated and reduced proportionally.

HomeBuy Direct is a government shared-equity scheme for the purchase of new homes on selected developments. You buy a minimum of 70 per cent of a property. A loan for the rest is then co-funded by the developer and the Government. There are no payments on the loan for the first five years, after which point an annual fee of 1.75 per cent is introduced, which increases annually in line with inflation. When the property is sold, the owner must share any increase or decrease in value with the lender. In the case of negative equity, the share retained by the lender will be surrendered to the mortgage provider, helping the buyer to pay off the mortgage.

NewBuild HomeBuy is a government shared-ownership scheme offering new homes for sale on a part-buy, part-rent basis through different housing associations. You can buy shares worth between 25 per cent and 75 per cent of the property’s value and pay a subsidised rent on the rest. If you wish to sell, the housing association will try to sell your share at the current market value to others in housing need. After a certain period, you may sell it on the open market.

Rent to HomeBuy, also known as Try Before You Buy and Rent Save Buy, offers new homes to rent for a pre-defined period, after or during which time the tenant has the option of buying a share of the property on NewBuild HomeBuy terms. Homes are available on assured short-hold tenancies, with rates set at 80 per cent or less of the market rent. The rental period provides an opportunity to save for a deposit, enabling mortgage eligibility.

By Kasia Maciejowska

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