What is Shared Ownership?
With the cost of living on the rise, you may be looking for ways to save money when purchasing a house. The Shared Ownership Scheme allows you to purchase a share of your home and pay rent on the rest, helping you to get on the property ladder.
What is shared ownership?
Shared ownership allows to buy part of a property from a housing association or landlord and pay rent on the remaining share. This means you only need a mortgage for your share of the purchase and the deposit will usually be significantly lower than when buying a property outright.
- Buy a share worth between 10% and 75% of the home’s full market value
- Pay rent to the landlord, local authority or housing association on the remaining share they own
- In most cases, pay monthly ground rent and service charges as shared ownership properties are sold on a long lease
Who is eligible to buy a shared ownership home?
To buy a property through the Shared Ownership Scheme, you must:
- Be over the age of 18
- Be a first-time buyer (or not currently own your own home)
- Have an annual income of less than £80,000 (or £90,000 if you live in London)
- Be able to prove that you can’t afford to buy a suitable home on the open market
- Not be in mortgage or rent arrears
- Have a good credit history and be able to show that you can afford the costs associated with owning your own home
How do I buy a shared ownership home?
To buy a shared ownership home, you can either take out a mortgage on your share or pay upfront with savings. You will also need to pay a deposit, which is usually between 5% and 10% of the share you buy.
What home can I buy through the Shared Ownership Scheme?
Through the Shared Ownership Scheme, you can purchase:
- A new build
- An existing home through a shared ownership resale scheme
- A property that is suitable for your specific needs if you have a long-term disability
These are all leasehold properties that are offered by a range of organisations such as housing associations or local councils, which act as the landlord and are often referred to as the ‘provider’.
Can I buy more shares?
Once you have lived in your shared ownership home for a certain period, you have the choice to purchase further shares of the property. This process is called ‘staircasing’.
An update to the staircasing model
There has been a recent update to the staircasing model which means that you have the option to buy additional shares in 1% increments (rather than 10%) each year for 15 years from the purchase date. This means you will not have to pay for an independent valuation and therefore pay less fees.
The minimum initial share buyers can purchase will also be lowered to 10%, compared to the current 25%.
If you are looking to staircase, our conveyancing solicitors can help you understand your right to do so and any conditions that need to be met. Additionally, we can assist with the legal documents involved and refinancing where required.
Can I ever fully own a shared ownership property?
Yes. If you choose to ‘staircase’ your property, you can usually increase your shares to 100%, meaning you then fully own your shared ownership home. If this is the case, you will no longer pay any rent, only the mortgage along with any service charges and ground rent.
Some properties may have restrictions on the amount you can staircase; for example, there could be a staircasing cap of 80%. It is important that you check the terms of the lease and ask a conveyancing solicitor who specialises in shared ownership to advise you on the next steps.
Can I sell a shared ownership property?
You can sell your shared ownership home at any time, however much of it you own. However, there are rules and restrictions around who can sell the property and whether it can be advertised on the open market.
If you want to sell your shared ownership property and you do not own 100% of it, the housing association or local authority has the right to buy it through ‘first refusal’. They also have the right to choose the buyer of your home.
If the time has come to sell your home, our conveyancing solicitors can guide you through the entire process and ensure everything runs smoothly.
Is shared ownership a good idea?
Although shared ownership has many money-saving benefits, there are a few things to take into consideration:
- Ongoing costs: all shared ownership properties are leasehold rather than freehold, whether that’s a flat or a house. This means you must pay ground rent on your home, as well as maintenance and service charges. You will need to be able to afford these extra costs on top of any shares you buy.
- Restrictions on what you can do with the property: in most cases, sub-letting your shared ownership home is not allowed. Similarly, you will most likely be required to obtain permission from the landlord or housing association before making any structural alterations to the home or even redecorating.
- ‘Staircasing’ costs and limits: increasing your property share incurs added costs such as valuation fees, legal expenses, mortgage fees and stamp duty (if your home’s market value is over £250,000 and you own more than an 80% share). Additionally, your housing provider may have restrictions in place such as the amount you can own outright and when you are allowed to start staircasing.
- The risk of negative equity: if you buy a shared ownership new build, there will likely be a ‘new build premium’. This relates to the added cost of new builds in comparison to similar, already-used, properties. This increased cost, alongside the risk of falling house prices, means you could fall into negative equity and lose money when you try to move house.To avoid being trapped in a new build property, consider your future goals before purchasing your home to ensure you will be able to use the house for many years to come.
Contact our shared ownership solicitors today
Whether you’re considering shared ownership and seeking advice on the next steps, or you are ready to staircase or sell your shared ownership home, our conveyancing solicitors are here to help.
We offer fixed-fee conveyancing with costs starting from £1,125 plus VAT, depending on the type of property, transaction and value.