With the ever increasing cost in living only going one way, more and more first time buyers are looking for more affordable ways in which to purchase their first home. Shared ownership schemes are offered by housing associations and allow you to part-buy and part-rent your home.
You buy a share, usually anywhere between 25% and 75% which you will purchase using a shared ownership mortgage and then you will pay rent, which is much more affordable than in the private sector, on the share that you do not own. Here are the pro’s and con’s of the scheme to help you decide if it is right for you.
- Great entry to the property market: If you find yourself in the position of wanting to own your own home but you cannot quite afford the mortgage on 100% of a property then shared ownership might be for you, offering you a percentage between 25% and 75% of the property’s value, enabling you to get onto the property ladder. This makes it a great option for lower income households who might not be able to afford a property at the current market value.
- Saving on rent: The other part of your property which is not owned by you will be retained by the housing association and you will therefore be obligated to pay rent on this share of the property, usually at a lower rate than in the private rental sector, to the housing association or local authority.
- Staircasing: Staircasing is the technical term for buying a larger share in your property. Many shared ownership schemes will allow you to purchase more of a stake in your home until you own a 100% share. How much you pay for these additional shares will depend on what your property is worth at the time.
- Eligibility:Not everyone is eligible to buy a home through the shared ownership scheme and individual housing associations may have caveats on their properties, a common one being you must currently live and work in the area in which you want to purchase a home. Your household income will need to be below £60,000 and you must either be a first time buyer or a previous homeowner who cannot afford to buy now. Other than that if you are renting a housing association property or have a long term disability you will also qualify.From April 2016: Shared Ownership in England is changing, and the limits are being lifted so that anyone with a household income of less than £80,000 outside London (and £90,000 in London) can buy a home through shared ownership.
- Re-sale & Permission: On occasions, when re-selling your shared ownership home you might run into problems as to who you can sell it to if you do not own a 100% share. You also might need to obtain permission from the housing association or local authority (whoever owns the additional shares) if you wish to make any improvements to your home.
- Lenders: Not all lenders lend to those buying on shared ownership schemes, and most of the time you can rule out the smaller lenders in this kind of purchase. However, some of the bigger banks and lenders do offer shared ownership mortgages, so you should be able to find one which is suitable for your circumstances.
For more information and to find your local Help to Buy agent you can visit the government’s Help to Buy website.