What is Shared Ownership?
Shared Ownership is one of a couple of government schemes designed to help people step onto the housing ladder when they otherwise couldn’t afford it.
Shared Ownership allows you to get a mortgage in order to buy a portion of a property, usually between 25% and 75%. Because you’re only buying part of the property, it means the deposit you need to save up for is considerably smaller than if you were buying the whole thing.
You then pay mortgage repayments on the part of the property you own and rent on the part you don’t. The rent is heavily discounted – usually 2.75% of the property value per year – so Shared Ownership is a very appealing option for all kinds of prospective buyers.
Find out more about Shared Ownership.
Who owns the rest of the property?
It’s a common misconception that buying a Shared Ownership property means that you need to share the property with another person. But don’t worry – effectively, the property is yours. Usually, the part of the property you don’t own is owned by a Housing Association, although sometimes it’s a private developer. They’re the organisation you’ll buy the initial portion of the property from, and they’re who you’ll need to pay your rent to each month.
Shared Ownership properties are always leasehold. Usually the organisation that owns the rest of the property will also own the lease.
Find out about the difference between freehold and leasehold.
Can I buy more of the property?
Yes! In fact, this is a key part of the Shared Ownership model.
The idea is that, although you might start off owning as little as 25% of the property, you can do what is called ‘staircasing’ – buying more of the property to increase the stake you have in it. You can do this is gradual increments or in larger steps. You can staircase until you own the property outright (as long as your staircasing limit isn’t set – sometimes there’s an 80% cap specified in your lease), or you can stay as you are and just sell whatever percentage of the property you own when you want to move.
Find out about the process of selling a Shared Ownership property.
Sometimes there’ll be a limit to the number of times you can staircase, set out in your lease. If there’s a limit it will usually be about three, but this isn’t as restrictive as it sounds – from a financial point of view, it’s better to staircase less often but in larger chunks anyway. Find out more about the cost of staircasing.
If the property is a house, you might also have the opportunity to buy the freehold once you’ve staircased to 100%.
How much control does the Housing Association/Developer have?
Whilst, for the most part, owning a Shared Ownership property should function the same as owning outright, there are a few limitations. There may be rules about how you use the property, for example, you may have to get permission to have pets, and you likely won’t be able to make significant structural changes (not that you should need to in a new property!). There’s also the case of costs, like the service charge and how often this will be updated, and how it will be calculated. All of this will be in your contract when you buy the property.
Also, if you can’t pay your rent, there are likely to be repercussions just like if you were privately renting.
How to apply for Shared Ownership
If Shared Ownership sounds like something you’d be interested in, the first thing to do is check if you’re eligible. You don’t want to go through all the research and preparation only to find out you’re not able to use the scheme.
To be eligible you need to be over 18 with a household income of less than £80k (£90k in London). You can’t currently own another home, unless you can prove it’s up for sale and that it’s not suitable for your current needs. You must also be unable to buy a suitable home without the help of a scheme, and you’ll need to have a certain amount of money in savings, usually about £4,000, but the exact amount will vary. Like with a conventional property purchase, you’ll also need a good credit score and you can’t be in mortgage or rent arrears.
Read more about the Shared Ownership eligibility criteria.
Once you know you’re eligible, the Share to Buy website will take you through all the steps needed to purchase a Shared Ownership property.
Read their step by step guide to see what the process is like.
If you’re still not sure whether Shared Ownership is right for you, read about the pros and cons of Shared Ownership to help with your decision.
Shared Ownership is a great way of getting onto the property ladder, even more so because you have the opportunity to keep saving and eventually own the house outright. For more information and answers to FAQs, visit the Share to Buy website.