Shared Ownership is an initiative designed to help buyers who cannot afford to buy a home in the open market. The idea is that you buy a portion of a home, gaining a mortgage for that portion, and then pay rent to a housing association for the remaining portion.
Over time, you can buy more and more of the home. In most cases, you can buy back the entire 100%, at which point you stop paying rent to the housing association and instead just pay the monthly mortgage payments. This process of buying more of the property over time is known as ‘staircasing’.
What’s the point of Shared Ownership?
This scheme is for people who want to be homeowners but cannot afford to get on the ladder in the traditional way.
Usually, you will have to buy at least 25% of the home with a required deposit of 5-10% of the value of that 25%. For example, for a £100,000 home, you would be buying 25%, £25,000. You will need 5-10% of this up-front, not 5-10% of the entire value.
Your mortgage, too, only needs to cover this 25%.
The rent you will have to pay to the housing association is much lower than open market rent, usually around 2.75% of the property value each year.
Stamp duty is also deferred until you reach 80% ownership.
All of this combines to make Shared Ownership a very accessible form of homebuying.
Do I have to share my home with someone else?
You’re very welcome to, but no, you don’t have to share your home. ‘Shared’ refers to the ownership of the home, not the occupancy.
Do I qualify for Shared Ownership?
To qualify for shared ownership:
- You must be at least 18 years old.
- You must have an annual household income of less than £80,000 outside of London, or £90,000 in London.
- You can’t already own another home. If you do, you must be in the process of selling it.
- You must not be able to reasonably afford suitable housing in the open market.
- You must not be in either mortgage or rent arrears (late payments).
Your credit history will also be checked, so this needs to be in reasonable shape (you can boost your credit score by following the advice outlined in this article). You should also have some personal savings, just enough to cover the costs of buying a home. Something around the £4,000-5,000 mark. And finally, you need to be able to pay for the 5-10% deposit required for shared ownership.
Where are Shared Ownership homes?
Shared Ownership homes can be found all over the country, even in the most desirable or pricy locations.
This is because developers are often granted planning permission only if they promise a certain amount of affordable homes will be included in their development. Shared Ownership is a good way for them to do this without having to change the quality or size of the homes.
You can search for shared ownership homes at Share to Buy.
Are you thinking of buying with Shared Ownership? How is it going so far? Let our readers know by dropping a comment in the section below.