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.
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:
- Buyer Status: Applicants can be first-time buyers, existing shared ownership homeowners, or former homeowners facing affordability challenges.
- Age Requirement: Applicants must be over 18 years old.
- 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.
Through 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?