What is shared ownership and am I eligible?

Shared ownership is when you co-own your house with a housing association. You purchase a share between 25-75% with a mortgage or savings and rent the remaining share from the housing association. This is a part-rent, part-buy scenario.

There is the option to purchase a larger share in the future – called staircasing, if you are in the position to, but no requirement to do so. A larger share would reduce the rent you pay. You could look to own the property in full if the terms of the lease allow.

Eligibility

You can buy a home through shared ownership if both of the following are true:

• your household income is £80,000 a year or less (£90,000 a year or less in London). This is based on combined income if buying jointly.
• you cannot afford all of the deposit and mortgage payments for a home that meets your needs

One of the following must also be true:

• you’re a first-time buyer
• you used to own a home but cannot afford to buy one now
• you’re forming a new household – for example, after a relationship breakdown
• you’re an existing shared owner, and you want to move
• you own a home and want to move but cannot afford a new home that meets your needs

For some homes, you may have to show that you live in, work in, or have a connection to the area where you want to buy the home.

You will need to register with the local Help to Buy agent to confirm your eligibility. Our mortgage advisers can help with an affordability assessment to check that the share you wish to purchase meets affordability.

Homes you can buy through shared ownership:

• a new-build home. Developments of a certain size will have a number of properties allocated specifically for shared ownership purchases.
• an existing home through a shared ownership resale scheme. Classed as a re-sale.
• a home that meets your specific needs, if you have a long-term disability – for example, a ground-floor flat

Shared ownership homes are offered by housing associations, local councils, and other organisations. They are called ‘providers’ or landlord.

All shared ownership homes (houses and flats) are leasehold properties.

You have both a mortgage and a rental commitment each month until such time as you are able to purchase 100% then the rental commitment would cease.

The total initial rent must not exceed 3% of the capital value of the unsold equity at the point of the initial sale, but it can be less. In this respect ‘initial sale’ refers to the first sale of a new Shared Ownership home and does not refer to future resales to a new shared owner.

Landlords are encouraged to set total rents that average no more than 2.75% of the value of the unsold equity at the point of initial sale across their portfolio of new Shared Ownership homes.

Source

How do I find a suitable property?

Most new developments will have an element of shared ownership housing, you could approach the development directly and ask which housing association is responsible for their shared ownership properties. Re-sale properties are marketed online and local housing associations may operate a facility to register your interest.

What deposit is required?

You will need to have a deposit of at least 5-10%, but as this is based on a percentage of the share you are buying it can be more affordable to find or save, rather than based on the whole property value.

For example, a couple with income of £21,000 and £18,000 giving a combined income of £39,000 with savings of £10,000 looking to purchase in an area where the house prices are £250,000, would not have enough deposit or borrowing capacity to enable them to purchase at this price range.

If they were to look at shared ownership and purchase a 40% share of a property valued at £250,000 this would be £100,000 and they could put down a 10% deposit of their share (£10,000) and a mortgage for the £90,000 balance.

Mortgage rates will depend on your current circumstances, our advisers will be able to provide a recommendation after fully assessing your individual situation and requirements. A larger deposit may mean a better interest rate.

You would have monthly rent on the remaining 60% share which would be owned by the housing association, based on the typical 2.75% this would be £343.75/month, in addition to your mortgage payment.

You may also have ground rent if your property was built or a new lease was created before June 2022.

Costs to consider when buying a shared ownership property:

Stamp duty land tax – depending on your buyer status and the property value. You also have the option to pay duty based on your share value or the property value.

If you pay at the full market value this would avoid you from paying further stamp duty when purchasing any additional share in the future.

Conveyancing costs may be higher than a standard purchase, due to the additional legal work involved.

The mortgage lender may have fees such as a valuation fee or a product fee

Broker fee for arranging the mortgage

What if I want to move at a later date?

When and if it comes to selling your shared ownership property there are some points to be aware of:-

If you don’t own 100% then you would need to approach your housing association and give formal notice, they will normally in the first instance market your property for a specified period of time.

This may come with fees such as marketing, valuation fee, and obtaining an Energy performance certificate (EPC).

If they are unable to find a buyer within a definer period of time, you are able to market via an independent estate agent – fees may apply.

A buyer would also need to fit with the eligibility criteria of shared ownership and normally be able to purchase the same share as you own.

Any equity accrued in your share after fees have been deducted will be yours upon completion, if you are purchasing a new property this can be used towards a deposit.

Why not make a short 15-minute phone call to our freephone mortgage helpline to get started? All you need to do is phone us directly on 0333 005 0333, or text ADVICE to 82228.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 26/01/2023

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