The government wants to increase the number of shared ownership homes (which accounted for less than 200,000 households in 2016) by 70% by 2021 – but what is shared ownership and how could you benefit from it?
What is shared ownership and who can benefit?
Shared ownership allows people who want to get on the property ladder but can’t afford a full mortgage to part-buy and part-rent a property by purchasing a 25%-75% share from a housing association and paying discounted rent on the rest.
To be eligible, you must be a first-time buyer or non-homeowner (although you may have owned a property in the past) with a household income of less than £80,000 (£90,000 in London).
How does shared ownership work?
Once you’ve found an eligible property (through a website such as Share to Buy), the relevant housing association will determine how much you can afford to buy and what the rent will be on the remaining share. The more of the property you own, the less your rent will be.
You’ll usually need to put down a deposit of at least 10% of the share you are buying and arrange a mortgage to cover the rest. You will also need to cover survey and legal fees, plus stamp duty (if applicable).
What are the pros and cons of shared ownership?
● Shared ownership is a good way for people who might not otherwise be able to buy a home (e.g. low-income households) to get onto the property ladder.
● Buying through a shared ownership scheme is usually more affordable than taking out a full mortgage, with a smaller deposit, smaller mortgage and cheaper total monthly payments (mortgage + rent) – which means that you might be able to live in a better home than if you had to buy one outright.
● You can save extra cash (after your mortgage and rent payments) to invest in the property later on.
● You can increase the amount of the property you own by buying additional shares (usually in specified increments) when you can afford to; this is known as “staircasing”.
● You can only buy shared ownership properties and there might not be a scheme in your preferred area.
● Not all lenders offer mortgages for shared ownership homes.
● Shared ownership properties are leasehold, so you’ll usually have to pay service charges as well as mortgage and rent payments.
● You can only make changes to the property if the lease and landlord allow it.
● Sub-letting (renting the property to someone else) is not allowed.
● The cost of buying extra shares will change with the property’s value, and the housing association will charge a valuation fee every time – plus you’ll have to pay any applicable fees to change your existing lease and mortgage.
● If you decide to sell, the housing association usually has the right to choose an eligible buyer or buy the property back.