What is Shared Ownership?
Shared Ownership gives first time buyers and those that do not currently own a home the opportunity to purchase a share in a new build or resales property that they otherwise might not be able to afford.
The purchaser pays a mortgage on the share they own, and pays a subsidised rent to a housing association on the remaining share. Because the purchaser only needs a mortgage for the share they are purchasing, the amount of money required for a deposit is usually lower when compared to the amount that would be required when purchasing outright.
The purchaser has the option to increase their share during their time in the property via a process known as ‘staircasing’, and in most cases can staircase all the way to 100%. In this instance, the shared owner will no longer pay any rent, just their mortgage along with any relevant service charges and ground rent.
Why buy a Shared Ownership home?
Shared Ownership is an alternative home-buying product for people who would like to purchase a property but can’t afford to buy on the open market. Shared Ownership costs are usually lower than other housing options for a number of reasons:
- The rent is less than the rate charged on the open market and usually charged at 2.75% of the property value per annum.
- You can start with a little as a 10% or 25% share dependent upon the shared ownership scheme being offered on the development
- Your deposit will be 5-10% of the price of the share, not of the full market value of the whole property.
When I part-buy part-rent my home, what am I buying?
Shared Ownership allows you to buy a percentage of a property, paying a mortgage on the share you own and rent to a housing association or council on the remainder. You will be buying a leasehold house or apartment.
You will have the option to buy further shares via a process known as ‘staircasing’ – and in most cases can staircase all the way to 100%, if and when you choose to do so. The price of buying further shares will be based on an independent valuation at the time that you purchase the further share.
What are the eligibility rules for Shared Ownership?
There are some general eligibility requirements that anyone wishing to buy a Shared Ownership home must meet:
- You must be at least 18 years old
- Outside of London your annual household income must be less than £80,000
- In London, your annual household income must be less than £90,000
- Shared Ownership purchasers are often first time buyers but if you do already own another home, you must be in the process of selling it
- You should not be able to afford to buy a home suitable for your housing needs on the open market
- You must show you are not in mortgage or rent arrears
- You must be able to demonstrate that you have a good credit history (no bad debts or County Court Judgements) and can afford the regular payments and costs involved in buying a home
- You should have savings or be able to easily access funds to cover the costs of buying a home
- You will also need access to the deposit amount required, which will usually be 5-10% of the equity share you are buying but will depend on the property and your affordability