What is shared ownership property?
Shared ownership is a scheme which allows first time buyers to part buy and rent their homes. You typically own your share and then rent a portion of the part you don’t at a reduced rate. The buyer will therefore pay the mortgage on the share they own and rent the part they don’t from a housing association.
This is beneficial for the buyer as they only need a reduced mortgage borrowing for their share and hence the deposit needed is a lot less when compared to typically buying the property outright i.e. 100% of the house.
During the course of ownership the owner will have the option to increase their share in the property by a process known as ‘stair-casing’ and most schemes allow this up-to 100%. Most of the homes on the scheme will be newly built, but some are re-sold by housing associations. At the time of writing all shared homes offered on a leasehold basis only & each provider will run the scheme differently.
Interesting Things About Shared Ownership:
The cost of owning your share in the property is reduced by:
- The monthly rent which is typically less than the rate charged on the open market value, and instead will be a percentage of the property’s value per annum.
- You can purchase your share in the property for as little as 25%
- Lenders will allow your deposit to be 5% of the price of your share (not the entity of the property)
- Usually Stamp Duty Land Tax (SDLT) can be deferred until your share reaches above 80%
Where Can You Find Shared Ownership Properties?
There are usually government-backed schemes to help new homeowners such as:
- Right To Buy
- Help To Buy
- Shared Equity
If you scout out new developments in your area you will often find Shared Ownership properties in private developments where the council have put in place affordable housing.
What Are the Requirements for Shared Ownership?
There are certain caveats and requirements that anyone wishing to purchase shared ownership home must meet. They will be detailed as follows:
- Age: You must be of at least 18 years of age
- Income Requirements: if you live outside of London then the total household income must be less than £80,000. If you reside in London it must be less than £90,000
- You generally should be a FTB (first time buyer) meaning you don’t already own a home. If you do, you must be in the process of having it sold
- Your income requirements must be such that you would NOT be able to purchase a suitable home on the open market
- Credit: there are costs involved with owning a home and you must therefore have good credit (no . CCJ’s, no bad debts, or arrears, late payments) and demonstrate you’re a good risk for the loan
- Savings: Typically have access to £4000 to cover the costs of purchasing the house and have enough savings as a deposit to access the 5-10% share of the property. You will have to find out if you can get a mortgage as not all lenders will give loans for shared ownership, but the major banks will do.
How to Get Started with Shared Ownership?
The first thing you will need to check is to see if you’re eligible. Some Housing Associations will have their own rules regarding affordability which will be made clear on each property listing in the description section. Once you have found a property of interest, you will need to contact the Housing Association and book a viewing. Once you like the property and make the offer, you will need to ensure you get the necessity deposit in place and the mortgage application started. One of the great things about shared ownership properties is it will include a budget calculator to give you a rough idea of the likely mortgage costs to pay