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What is Shared Ownership? | Your Wonderful Guide to Homeownership

What is Shared Ownership? 

What is Shared Ownership?

 

The Shared Ownership Scheme, a government initiative, allows individuals to purchase a portion of a property from a housing association—a non-profit organisation dedicated to offering homes. This arrangement allows buyers to acquire a stake in the property with a reduced deposit and mortgage. Short term loan 1

The deposit and mortgage requirements are lower since ownership is limited to a share of the property. While this results in smaller monthly repayments, it’s essential to consider additional financial obligations, such as rent for the portion of the property not owned, monthly service charges, and ground rent.

Shared Ownership properties encompass a variety of options, including new builds, existing properties, houses, or flats. Notably, all Shared Ownership properties, even houses, operate on a leasehold basis, which is atypical for houses.

Eligibility for Shared Ownership is contingent on certain criteria:

  1. Buyer Status: Applicants can be first-time buyers, existing shared ownership homeowners, or former homeowners facing affordability challenges.
  2. Age Requirement: Applicants must be over 18 years old.
  3. Income Limit: The annual household income should not exceed £80,000 (£90,000 in London).

Shared Ownership is just one of several schemes designed to facilitate homebuying. Alternatives include Help to Buy, where the government provides a loan of up to 20% of the property value (increasing to 40% in London). Exploring these options can empower individuals with various paths to homeownership.

What is Shared Ownership? | How does Shared Ownership work?

In the realm of Shared Ownership, you have the autonomy to determine the portion of a property you can financially commit to, purchasing that share from the housing association.

Upon making this decision, you contribute a deposit equivalent to at least 5% of your chosen stake and secure a mortgage to cover the remaining cost. Rent is then paid for the portion of the property that you do not own.

opportunityThrough a process termed “staircasing,” you can progressively increase your share in the property. This process allows you to ascend until you own 75% of the property and, in some instances, potentially achieve full ownership (100%).

However, it’s crucial to note that not all housing associations permit a 100% ownership transition, necessitating verification beforehand.

It’s worth considering that each staircase incurs legal costs, prompting a strategic approach of acquiring larger portions. Additionally, certain housing associations may restrict the frequency of staircasing transactions.

In April 2021, the government introduced a revamped version of Shared Ownership, set to become available for home purchases in 2022, with a limited number accessible before that date.

To determine a property’s eligibility for the updated Shared Ownership scheme, it is advisable to inquire with the provider during your initial contact. Stay informed about the evolving landscape of Shared Ownership to make the most informed decisions for your home ownership journey.

What is Shared Ownership? | Why opt for a Shared Ownership residence?

Shared Ownership presents a viable home-buying solution for individuals aspiring to own property but facing financial constraints on the open market. The associated costs with Shared Ownership are typically more affordable compared to other housing alternatives, and here’s why:

  1. Reduced Rent: The rent in Shared Ownership is below the market rate, typically set at 2.75% of the property’s value annually.
  2. Flexible Share Options: Through the existing scheme, you can commence with a minimal 25% share or with the updated Shared Ownership model, even as low as 10%.
  3. Lower Deposit Requirement: Unlike traditional home purchases where the deposit is a percentage of the entire property value, in Shared Ownership, the deposit is only 5-10% of the share’s price.
  4. Deferred Stamp Duty: Stamp Duty Land Tax (SDLT) can often be deferred until your ownership share reaches 80%, providing financial flexibility.
  5. Prime Location Opportunities: Shared Ownership properties are frequently integrated into private developments due to planning requirements. This ensures the presence of affordable housing in coveted areas, making it an attractive option for potential homeowners.

In summary, Shared Ownership addresses financial barriers to homeownership and offers flexibility and the chance to reside in sought-after neighbourhoods within private developments.

What considerations should be kept in mind when engaging in Shared Ownership property transactions?

Now that you have an understanding of “What is Shared Ownership?” Let’s address the above title. Over the past forty years, the government’s initiative of combining buying and renting, known as Shared Ownership, has facilitated the acquisition of homes for numerous individuals. However, deciding to opt for this scheme is significant and requires thorough research to ensure it aligns with your specific needs and circumstances.

Shared Ownership properties operate on a leasehold basis. Depending on the property in question and the duration of your residence, a need to extend the lease might arise at some point during your tenure. Comprehending the calculations behind service charges, rent adjustments, and maintenance expenses is crucial to making informed decisions.

In addition to lease considerations, delve into the intricacies of the Shared Ownership arrangement. Explore potential changes in your financial obligations, grasp the dynamics of property management, and familiarise yourself with any future responsibilities that may emerge. This comprehensive understanding is essential to navigate the Shared Ownership landscape successfully.

Moreover, expanding your knowledge about the property market, current trends, and the economic environment can provide valuable insights. Stay abreast of legalities and regulations, and consider seeking professional advice to ensure a well-informed and secure investment. By delving deeper into these aspects, you can enhance your confidence and make a more informed decision when venturing into Shared Ownership.Connect for Intermediaries

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