What is Shared Ownership?

A shared ownership purchase is where a person who opts to purchase a share of a property. They will purchase anything between 10%-75% of the equity (some require  minimum of 25%) and pay rent on the portion of equity that they do not own. It is also referred to as part buy/part rent. Usually the buyer will mortgage the equity share they are purchasing and then pay rent to a housing association on the remainder. There are also other costs payable such as ground rent/service charges if it is a leasehold property. This often means that a lower deposit is required for the buyer to get a foot onto the property market.

Who can apply for shared ownership?

There are strict criteria as to who are eligible to buy under a shared ownership scheme:

A             your household income is less than £80K per annum (£90K per annum in London)

B             you cannot afford all of deposit/mortgage payments for a home that meets your needs

C             you’re a first time buyer

D             you used to own a home but cannot afford one now

E              you own a home and want to move but cannot afford one that suits your needs

F              you are forming a new household – eg remarriage

G             you are existing shared ownership owner and want to move.

Is there any restriction on the type of home you can buy?

You can buy:-

1              new-build house

2              existing home for sale through registered provider’s shared ownership resale scheme

3              disabled people can buy a property that meets specific requirements but they must have a long-term disability.

Advantages of shared ownership

1              There is an element of security as, unlike a straight tenancy, you have long-term occupancy whilst keeping the outgoings at a manageable level. As long as you pay mortgage/rent you can remain for the term of your lease which can be extended.

2              There is a lower deposit required as you only pay the deposit on the equitable portion.

3              There is a greater likelihood of getting a mortgage over the equitable portion as your overheads are likely to be lower.

4              You can “staircase” or buy greater portions of equity over time as your finance permit.

5              If you staircase your share in the equity to 100% you will own outright and the rental payment ceases.

6              You can sell your share on the open market when you wish.

7              Usually the first purchase of equity is likely to fall below the stamp duty threshold.

Disadvantages of shared ownership

1              The pool of lenders who agree to lend against shared ownership properties is reduced so this may mean less favourable interest rates are applicable.

2              You are likely to have to pay 100% of the service charges/ground rent no matter what equitable portion you buy.

3              Stamp duty is payable when you own 80% or more.

4              Legal fees are likely to be higher when purchasing a shared ownership as there are the seller’s solicitors and the Housing Association’s solicitors involved and shared ownership leases to approve.

5              The shared ownership lease may have certain restrictions you have to observe such as allowing the Housing Association to nominate a buyer before being able to sell on the open market.

Shared Ownership – the future

The Government announced certain changes to the shared ownership scheme under the Governments “Affordable Homes Programme (AHP) which are likely to come into effect between 2021-2026.  A summary of the changes – which will only apply to future shared ownership properties and is not retrospective – are:-

A             Buyers can now purchase a minimum of 10% (rather than 25% previously)

B             Option to staircase in 1% increments for first 15 years.

C             Housing Association/Landlords will be required to contribute to costs of essential repairs during first 10 years.

D             Housing Associations/Landlord to only have 4 weeks in which to nominate a buyer instead of 8 weeks.

E              Lease term will now be 990 years instead of 99/125 years previously