Shared Ownership 101: Shared Ownership explained
What do I need to know about Shared Ownership?
There are a lot of myths and misconceptions around Shared Ownership which can cause confusion amongst potential buyers.
Do I have to share my home with someone else? Will I only be able to find an affordable home if I leave the area I love? Surely I can’t decorate as I’m still paying rent?
The answer to all of the above? No! Check our our Shared Ownership 101 for an overview of the government-backed part-buy part-rent scheme.
Shared Ownership Basics
If you can’t quite afford the mortgage on 100% of a home, Shared Ownership offers you an alternative route onto the property ladder by giving eligible purchasers the opportunity to buy a share in a new build or resale home.
Also referred to as part-buy part-rent, Shared Ownership allows buyers to purchase a share of a leasehold property; they will pay a mortgage on the share they own, and a below-market-value rent on the remainder. As the purchaser only needs a mortgage for the share they own, the amount of money required for a deposit is much lower compared to purchasing outright.
Shared Ownership Eligibility
Shared Ownership is a stepping stone for those looking to buy their own home but can’t quite afford to buy on the open market. Because of this, there are some specific eligibility criteria that you need to meet:
- You must be at least 18 years old.
- Your maximum household income must not exceed £90,000 per annum in London or £80,000 in the rest of England.
- You must be unable to purchase a suitable home to meet your housing needs on the open market.
- You do not already own a home, or you will have sold your current home before you purchase through the Shared Ownership scheme.
- You should have a deposit equalling to the amount required for the share that you are purchasing (remember that you don’t need to pay a deposit on the full market value of the property – just on the share you’re buying!).
- You must show that you are not in mortgage or rent arrears.
- You must be able to demonstrate that you have a good credit history (that means no bad debts or County Court Judgements) and can afford the regular payments involved with buying a home.
Shared Ownership Prioritisation
While Shared Ownership aims to help first time buyers take those first steps on to the property ladder, the scheme is actually available to anyone (including second steppers, upsizers and downsizers) as long as they meet the eligibility criteria. However, there are some rules in regards to prioritisation:
- Priority will be given to members of the military.
- With some developments, local authority planning permissions may require that preference is given to applicants that already live or work in the area; this will be put in place by the local council and not the housing association.
- You will not be able to purchase a Shared Ownership property if you already own another home. Alternatively, if you do own a property, you must be able to show that you are in the process of selling upon application.
Shared Ownership Outgoings
Paying both rent and a mortgage each month can sound scary, but the beauty of Shared Ownership is that these costs actually even each other out:
- Initially, a buyer would purchase a share of their desired property – usually between 25% and 75%.
- A mortgage will be paid on the share you own, while a subsidised rent on the remainder will be paid to the relevant housing association, along with any service charges and ground rent.
- If you go on to increase your owned shares (also known as ‘staircasing’), your monthly mortgage payments will increase and your rent will decrease, up until the stage where you purchase 100% of your property. At this time, you will no longer pay any rent, just your mortgage and any relevant service charges and ground rent.
Shared Ownership on leasehold homes
Most flats, regardless of tenure, are sold as leasehold properties with the freehold held by the landlord – this will often be a local authority or housing association.
Leasehold ownership is a long tenancy where your lease will give you the right to occupy and use the home for a longer period – or the ‘term’ of the lease. To date, leasehold terms have usually been for 99 or 125 years but under the new Shared Ownership model as part of the government’s Affordable Homes Programme, it is expected that leases will be extended to 999 years as standard. The term of the lease will be fixed at the very beginning, therefore decreasing in length each year, and the home can be bought or sold during that time.
Most Shared Ownership leasehold properties are granted by housing associations as part of their homeownership programme. Such leases are almost always in a format approved by the Homes and Communities Agency (HCA, formerly the Housing Corporation).
New Shared Ownership Model
The government previously announced their Affordable Homes Programme – a new investment which will see a £12 billion boost into the housing sector, providing up to 180,000 new homes across the country. A new model for the part-buy part-rent scheme will also be implemented on new build Shared Ownership properties delivered through the Affordable Homes Programme for five years from April 2021.
This new model means the following for buyers purchasing a home through Shared Ownership:
- The minimum initial share buyers are able to purchase will be lowered to 10%, compared to the current 25%.
- The introduction of a 10-year repairs and maintenance warranty.
- The introduction of longer leases on new build homes.
- Shared owners will be able to buy additional shares (also known as ‘staircasing’) in 1% increments, compared to the current 10%.
- Shorter nomination periods for shared owners who are looking to sell their home.
If you are interested in a specific new build property or development, we would recommend discussing your options with the relevant housing provider as the new model is still in its early stages. You can also visit the government website to find out more about the new Shared Ownership model and register with Share to Buy to keep up to date with the latest announcements.
Some homes available with a minimum 10% share are already listed on Share to Buy, so head to our property portal to start your search!
If you’re interested in purchasing a part-buy part-rent home, you can find out more about Shared Ownership terms and conditions on Share to Buy. You can also start your property search on our property portal, using key filters such as location, number of bedrooms and deposit amount to find your ideal home.