A guide to shared ownership
Getting a foot on the property ladder has become increasingly difficult for first time buyers and as a result shared ownership has become popular.
There is a wealth of information about shared ownership on sites such as Share To Buy and below is a guide to what you need to know about the scheme:
1. Under shared ownership you buy a share of a property – between 25 per cent and 75 per cent – from a housing association. You then pay the housing association an ‘affordable rent’, which is significantly less than a commercial rent, on the portion of the property you do not own.
2. There is a set of eligibility criteria for shared ownership schemes. First time buyers qualify but if your household is earning more than £80,000 a year, or £90,000 a year in London, you are not eligible.
3. Even if you have owned property in the past, you could still be eligible for a shared ownership scheme in certain circumstances, for example, if you are recently divorced. Over 55s can take advantage of the OPSO scheme (older people’s shared ownership scheme). The scheme can also be used by couples wishing to move to a larger property after having children.
4. You will need to put down a deposit – usually 10 per cent – on the share of the property you have decided to buy. You will also be liable for stamp duty, conveyancing fees and other costs associated with home ownership.
5. You should be able to take out a mortgage, subject to the normal credit checks by the lender on your shared ownership property, just as you would on a property you had bought outright.
6. Properties available through the shared ownership scheme are leasehold and, in most cases, are new build or relatively new developments in a cluster of other shared ownership properties. You may have to pay service charges for the maintenance of the common parts on top of your rental and mortgage payments.
7. Once you have a foot on the property ladder through the shared ownership scheme, you can steadily increase your stake in the housing market by increasing the proportion of your property which you own outright. By a process known as ‘staircasing’, you can theoretically increase your share from 25 per cent to 50 per cent to 75 per cent until you own the property outright.
8. If you do get to own your home outright, you can sell it at your discretion – although the housing association must be given first refusal. Otherwise if you decide to move but still own only a share of the property, the housing association will put it up for resale and find a buyer.
9. The single biggest attraction of shared ownership is financial. You will be able to get a foot on the housing ladder sooner than you otherwise would have done. You are also likely to find yourself in a community of like-minded people who have chosen the shared ownership option for the same reasons.
10. On the downside, because you do not own the property outright, you will not be able to make the kind of alterations that you might want without the permission of the housing association, which acts as your landlord. You will be part-owner and part-tenant without the independence that comes with outright ownership.
The shared ownership scheme will not suit everyone and you will need to do your sums carefully before taking the plunge, just as you would if you were buying a property outright. But for Generation Rent, it offers an exciting alternative path to home ownership.