Floris ten Nijenhuis
How does Shared Ownership work?
Who can apply?
As per the page on the government website. You can buy a home through shared ownership if both of the following conditions are true:
Your household income is £80,000 a year or less (£90,000 a year or less in London)
You cannot afford all of the deposit and mortgage payments for a home that meets your needs
One of the following condition must also be met:
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
Can I buy any home through this?
In short, no, shared ownership homes are offered by housing associations, local councils, and other organisations. This means they are often purpose built homes just for this. As such they tend to be new builds.
Can I increase my ownership stake?
When you purchase a home through Shared Ownership, the minimum purchase amount is normally 25%, although some people now allow 10%. If you choose to increase that over time you can do so through a process called ‘staircasing’. That means that if your circumstances change you will now be able to increase your mortgage or buy up more equity in cash. Be careful though, as you may only be able to do this a few times based on the deal you get into.
What’s good about shared ownership?
Shared ownership is a great way to get onto the property ladder if you cannot afford to buy a full property. Although there are restrictions to who can apply, it is generally an affordable way to buy what you can today and work towards owning more in the future. If you decide to sell, you will also get rewarded for the investment you have made, if the property price increases.
What to watch out for
Because Shared Ownership properties are always leasehold, no matter what size share of the property you own you must pay full ground rent and service charges.
Also, you might struggle to find a lender who offers Shared Ownership mortgages, although as the concept becomes more popular, more lenders will likely get involved.
Staircasing is expensive, because every time you wish to purchase more of the property you will be asked to pay for an independent third party valuation and if you are increasing your mortgage you’ll have to pay some fees for that too.
Finally, if you choose to sell your Shared Ownership property be prepared for a more complicated process than usual. Most housing associations will have what is called ‘first refusal’ meaning that before you can sell it you’ll need to offer them the opportunity to buy it back from you. You might have to do this even if you own 100% of the property!
Want to read about other alternatives to buying a home with a mortgage? You can find out more here