A guide to shared ownership

By Charlotte Yau
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What is shared ownership, you ask? Find out how it works, the benefits and disadvantages, and if you’d be eligible.

Shared ownership is a scheme to help people get onto the property ladder without paying out a huge sum from the off. Instead, you the buyer pay for a percentage of the property through a deposit and mortgage. You pay for the remaining percentage in monthly rent payments.

Shared ownership has helped around 200,000 people get on the ladder and largely revolves around new-build homes.

So, could it help you with getting on the property ladder? Find out here.

How does shared ownership work?

Instead of buying 100% of a house, you buy between 25% and 75%. You do this with a mortgage and deposit. You then make rent payments on the remaining percentage.

So, for example, you could buy 50% of a house and pay the remaining 50% in monthly rent payments.

Further down the line, when you are more financially stable, you can buy a bigger percentage of the property. This can go on and on until you own 100% of your house. Or, you can sell whatever share you own at that point.

Eligibility

For shared ownership you will need a deposit and a mortgage for part of the value of the house, and the ability to pay rent on the remainder. Generally the deposit is quite small, making buying more accessible.

You are expected to have around £4,500 in savings and the same again available for the deposit for the mortgage part.

You will need to show you can afford the mortgage and the rent each month, on top of your usual outgoings.

Your income must be under £80,000 throughout the UK, aside from in London, when it must be under £90,000.

Benefits

- Shared ownership works well for lower income households
- It can work out cheaper than renting as the rates for the rental portion of the scheme are usually much lower than market rates.
- Over time you can buy a bigger share of the house, so you own more and pay less rent.
- You can keep purchasing more shares in the house until you own it outright.

Disadvantages

- The general resale of shared ownership properties hasn’t proven great.

- You don’t usually own the house outright at the point of resale.

- You may find yourself unable to move up the housing ladder in your next move.

- A shared ownership mortgage often comes with higher rates than normal mortgages.

- While you only own part of the home, you are responsible for 100% of any service charges and any repairs.

- Repossession, while rare, is a possibility if you fall behind on rent payments, and you don’t just lose the home but any deposit too.

- If you want to sublet the house once you own 100%, you may still need permission to do so from the housing association.

As you can see, the disadvantages outweigh the advantages, and could have you wondering ‘is shared ownership worth it’? Well, that has to be a personal decision. While not idyllic, it does give low income earners a shot at an alternative to renting, and a chance to own their own home.

If you’re unconvinced, still consider taking the time to reach out to those in the know and have some conversations. You could find that despite its downsides that in your case the benefits make up for them.

Where to find shared ownership houses

If you are looking to buy in London, First Steps is the place for you. It is aimed at low and medium income earners looking to live in the capital.

If you are looking elsewhere in the country, Sharetobuy.com collates pretty much everything available for you. You can search for shared ownership houses in your specific area of interest and find out what is available.

A third option is to register with individual housing associations. Doing so often has some requirements, however; you may have to prove a link to the area in question, or an income limit.

Application Process

Once you’ve found a housing association or even a house you’re interested in, reach out to them. Check you do meet all their eligibility criteria and provide them with any proof they might need of this.

There are some prerequisites when applying for the scheme and these include your working status, where you reside prior to applying and whether or not you are a first-time buyer. These criteria differ depending on the borough you want to live in.

Next up, do some research around getting a mortgage. Shared ownership houses aren’t mortgage lenders’ favourite schemes out there, but there are still various options. Most of the big name lenders will participate though. You’ll have to pay a deposit, prove that you can afford the scheme and have your affordability checked thoroughly.

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