Looking for an affordable way to get onto the property ladder? Shared Ownership might be the way to go.
Shared Ownership is one of the UK government’s affordable home ownership schemes that allows individuals and families to purchase a share of a property, usually between 25% and 75% of its value, and pay rent on the remaining share. Over time, there’s also the option to increase the share you own in the property which is called staircasing.
If you’re unable to buy a property outright, Shared Ownership is an affordable way to get your foot on the property ladder. Below, we share the key things you need to know when considering this route, but to find out more about Shared Ownership and other government schemes, you can also visit the Own Your Home website.
When thinking about Shared Ownership, it’s important to understand whether you’re eligible to benefit from the scheme. Some of the main eligibility criteria include:
- You must be over 18 years old
- You must be a first-time buyer or an existing homeowner who’s unable to buy a suitable home on the open market
- You must be a UK national or have the right to live in the UK permanently
- Your household income must be below £80,000 per year, or £90,000 per year in London
- You must be able to demonstrate that you have the financial means to purchase a share of a property and pay rent on the remaining share
- You must be able to afford the monthly mortgage and rent payments, as well as any other related costs such as maintenance and insurance for example
If you’re eligible for Shared Ownership, you meet the criteria above and would like to purchase a property using this method, you’ll need to find a property that’s available through the Shared Ownership scheme. These properties are usually new build homes or properties that have been owned by a housing association. Here at OnTheMarket, to make your search easier, you can simply filter your property search to return Shared Ownership homes when looking for an appropriate property.
You’ll need to apply for the scheme and go through the usual process of getting a mortgage and the housing association will carry out a financial assessment to determine how much you can afford to pay. Once your application is approved, you’ll be able to purchase a share of the property, which is usually between 25% and 75% of the property’s value. You’ll then pay a mortgage on this share and pay rent to the housing association on the remaining share.
The minimum share you can buy has recently been reduced to 10% but this may not apply to all Shared Ownership homes yet so it’s best to check which model you’re applying for when beginning the process. As time goes on, as you pay off your mortgage and build up equity in the property, you can choose to purchase additional shares in the property until you own it outright which as mentioned at the start of this post is known as “staircasing”.
A wide range of properties can be purchased under the UK government’s Shared Ownership scheme including apartments, houses, and bungalows. While properties available through the scheme are usually new builds, you may sometimes also be able to purchase a share of an existing property through a shared ownership resale scheme and there are also homes available that meet specific needs if you have a long-term disability.
An important detail to note is that all Shared Ownership homes are sold as leasehold but if you reach 100% ownership, in the case of houses, the freehold will transfer to you. If you reach 100% ownership of a flat, the property will remain leasehold but will no longer belong to the Shared Ownership scheme.
As with any method of getting onto the property ladder, there both pros and cons to the Shared Ownership route which should be considered when thinking about your decision.
Pros of Shared Ownership:
- It can be a more affordable way to get onto the property ladder, especially if you’re unable to afford to buy a property outright
- The scheme may allow you to get onto the property ladder sooner than you might’ve been able to otherwise
- Allows you to purchase a share of a property and pay rent on the remaining share, which can also be a more affordable option than renting
- You have the option to increase your share in the property over time, which can eventually lead to you owning the property outright
- Shared Ownership properties are usually new build properties which can be a pro if you prefer modern, energy efficient homes
- The scheme is available to a wide range of people, including first-time buyers and existing homeowners
Cons of Shared Ownership:
- Not all lenders offer Shared Ownership mortgages
- When you want to sell the property, initially you must try to sell it back through the Shared Ownership scheme rather than on the open market
- You’ll have to pay the service charge associated with your property, no matter how small your share might be
- You may not be able to make significant home improvements unless this is defined in the lease or approved by the landlord or housing association
- The availability of properties through the Shared Ownership scheme can be limited, depending on your location and other factors, so you may need to be patient and flexible in your search for a suitable property
To find out more on Shared Ownership you can visit the Own Your Home website.
Content provided by OnTheMarket.com is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.
