- Shared Ownership
- Specialist lending
If you are struggling to get onto the property ladder, do not give up on your plans just yet. There government offers a variety of schemes for first-time buyers that could help you purchase your first property. One of these schemes is called Shared Ownership.
Shared Ownership is a government-backed initiative aimed at helping first-time buyers and those with lower incomes step onto the property ladder. This scheme allows individuals to purchase a share of a property and pay rent on the remaining portion. Over time, you can increase your share of the property through a process called “staircasing.”
In this guide, we will walk you through the key aspects of Shared Ownership, including eligibility criteria, the application process, and how to manage your shared ownership property.
Shared Ownership allows you to purchase a share (between 10% and 75%) of a property’s full market value and pay rent to the landlord on the remaining share.
When you buy a shared ownership home, you can decide how much deposit you can afford to put down (if any – it is possible to get Shared Ownership mortgage with no deposit at all) and what stake of the property you can buy. You can put down none or as little as a 5% deposit and take out a mortgage to cover the rest. You then pay rent on the part you do not own.
You can buy additional shares in the property over time, a process known as “staircasing,” until you own 75% of the property or you own the property outright. Staircasing incurs additional legal and valuation costs, but a higher ownership share means lower rent payments. It is worth checking how many times you can increase your share of the property with your housing association. It could make more sense to buy a bigger share of your property if the legal costs are hefty or/and if there is a limit on the number of times you can staircase.
Advantages of shared ownership include:
Disadvantages of a shared ownership scheme are:
While shared ownership was created mainly to help first-time buyers, the scheme is available to anyone meeting the criteria.
To be eligible, you must:
Shared ownership homes are prioritised for first-time buyers, key workers, military personnel, or people with disabilities. Some housing associations may give priority to specific groups and have their own eligibility criteria.
The rule is that a minimum of 25% of the applicant’s net wage and 2.5x their gross income should be used as a minimum towards home ownership. There is also an upper limit of 45% of the applicant’s net wage and 4.5x their gross salary to ensure they can afford payment long-term. These caps are absolute limits and cannot be breached. The agency views all properties being purchased with a ratio between these multiples as maximising their contribution.
It depends on your budget, location you want to buy in and availability. You can choose from some of the best quality homes on the market. The majority of Shared Ownership properties are new build homes that come with the latest in fixtures and appliances and modern décor. You can move in straight away and enjoy your new high-quality home.
The best way to start is to determine your budget. You need to factor in deposit, mortgage, and any additional costs (such as legal fees). It is worth talking to your mortgage advisor to find a suitable mortgage product.
You need to take into account additional costs, such as service charges to cover maintenance and communal areas, and ground rent. They will be confirmed by the landlord. You should also take out home insurance to protect your property and belongings. We can help with that.
You can choose between repayment and interest-only mortgages. There are plenty of options available and our team will be able to help you find the best product on the market.
Bear in mind that you will need a 5% to 10% deposit to secure a mortgage.
You can sell your shared ownership home at any time. If you own 100% of your home, you can sell it on an open market via an estate agent.
If you don’t own 100% of your property, you need to notify the landlord of your intention to sell. Landlords often have a “first refusal” option, which means they may have the opportunity to buy your share before you can sell it on the open market.
The landlord has a nominated period (this is agreed upon your lease) to find a new buyer. If the landlord does not find a buyer within the nomination period, you can market your property through a local estate agent and sell on an open market.
If the landlord finds a buyer during the nomination period, you will be paid no more than the current market value of your share. The price will be based on a valuation by a surveyor who is registered with the Royal Institution of Chartered Surveyors (RICS), for instance, Trinity Rose. The valuation needs to be arranged either by yourself or the landlord, depending on their policy. You will incur the valuation costs.
If the landlord manages to find a new buyer and sell the property for you, they may charge you a fee for doing so. This cost should be listed in either the key information document or the lease for your home.
You will need to hire a solicitor to help you with the legal process and cover the legal fees yourself.
The process simplified:
The process of buying a property through shared ownership can vary in terms of the time it takes, and it depends on several factors including the stage of construction, availability on the market and the length of time required to get a mortgage. On average the process takes anywhere from 1-3 months.
There is no change to the eligibility criteria. The changes are shown in the table below.
|Shared Ownership available on homes until 2023
|NEW Shared Ownership available on homes from 2022
|5% of your share in the property
|5% of your share in the property
|Minimum initial share of property for sale
|10% share each year
|1% share each year, with reduced fees
|Who covers repairs
|You are responsible for carrying out repairs
|You receive a 10 year warranty
|Nominated period for landlord to sell
|8 to 12 weeks
|4 to 8 weeks
The new model was implemented on all newly built Shared Ownership homes delivered through the Affordable Homes Programme in April 2021 and will run for five years up to 2026. Some properties are already available.
No, there is no minimum income required for the Shared Ownership scheme as a whole. However, the seller will determine the minimum income required for each property based on the property valuation. If you have a large deposit, you can make the minimum income required more affordable.
No, it is not possible to own more than one Shared Ownership home at the same time. If you are in the process of selling another property, you must prove that you have accepted an offer to sell your existing property.
No. If you have enough money to purchase the share without a mortgage, for example from an inheritance or savings you don’t have to take out the mortgage. You will need to prove you are still able to afford the monthly costs such as rent.
The general rule is that the total cost of the mortgage, rent and service charges must be no more than 45-50% of your household income after tax. Take a look at the 45% rule description in this guide.
Shared ownership mortgages can have different costs and structures compared to traditional mortgages. There is a limited number of mortgage lenders that will lend on shared ownership properties meaning you’ll have less choice and may end up paying more in interest and fees.
Shared ownership typically requires a lower upfront deposit compared to a traditional mortgage to make it more accessible for first-time buyers who might not have a large savings cushion. However, the lower deposit may mean higher ongoing monthly payments.
Shared ownership mortgages may have slightly higher interest rates compared to traditional mortgages. Lenders might consider shared ownership a riskier proposition, which can lead to higher interest rates. However, the difference in interest rates can vary, and it’s essential to shop around for the best deal. We have access to a large number of mortgages and will help you find the best mortgage for you.
You can sell your shared ownership home at any time.
This depends on your share of the property and your lease. Some developers have a nominated period to sell the property on your behalf. If they don’t sell your home within the agreed period, you can advertise it on an open market.
Once all the legal and financial aspects are in order, the sale can be completed, and ownership of your share is transferred to the new buyer.
If you have an outstanding mortgage on your share of the property, you’ll need to repay this using the proceeds from the sale.
Yes, it is possible to release equity from your shared ownership home, but there are specific considerations involved in the process. Firstly, you need to check whether your housing association allows it. Some housing associations may have restrictions or requirements for equity release. The amount you can release must be enough to buy the rest of the property, so you own 100% of it on completion of the loan.
You can paint, decorate and refurbish a shared ownership home, for example, replace a kitchen or bathroom, but to make any structural changes you will need written permission from your landlord.
If you think that Shared Ownership is right for you, contact us here and let us guide you on your journey to owning your property.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
22/11/2021: Southampton, UK: Mortgage Decisions, the leading southeast mortgage and financial services provider, has been appointed preferred mortgage broker panel member by Sovereign Housing Association. Sovereign is one of the...
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