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? Won’t paying both rent and a mortgage send my monthly outgoings through the roof? Will I only be able to find a home I can afford if I leave the area I love?
The answer to all of the above? No! Time to grab yourself a cup of tea, put your feet up and find out all you need to know about the 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 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 allows purchasers to become owner-occupiers, with the long-term security and stability of home ownership at a price that’s still affordable.
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 like 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 – which will usually be for 99 or 125 years. 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 home ownership programme. Such leases are almost always in a format approved by the Homes and Communities Agency (HCA, formerly the Housing Corporation).
If you think that Shared Ownership is the home buying option for you, then why not take a look at our available properties; you can use our filters to find your ideal home, basing your search on key criteria including location, number of bedrooms and deposit amount.
If you’re interested in finding out more about the scheme, you can also check out our FAQs section. Alternatively, if you’d like to find out about other home-buying options, why not check out our Help to Buy 101!