Demand is growing for shared ownership schemes in locations where many people are priced out of the housing market. But what’s it really like? Often it gives you much cheaper living costs, but the fluctuation in rent and service charges are current, whereas, these issues are avoided when buying outright.
What is shared ownership and can it work for me?
Often shared ownership gives you much cheaper living costs, but the fluctuation in rent and service charges are current, whereas, these issues are avoided when buying outright.
Who can apply for Shared Ownership?
First-time buyers or those who used to own a home but can’t afford one now. People whose combined household income is less than £80,000 (in London, it’s less than £90,000). You rent a council or housing association property.
How shared ownership works?
With shared ownership, you buy between a quarter and three-quarters of a property.
You have the option to buy a bigger share in the property at a later date.
These schemes are aimed at people who don’t earn enough to buy a home outright.
Most of the homes available are newly built, but some are properties being re-sold by housing associations.
All shared ownership homes in England are offered on a leasehold only basis.
Shared Ownership allows you to buy a share in a new home, ranging from 25% to 75%, depending on what you can afford. A housing association owns the remaining share, and you pay a reduced rent on that share.
This means that you need to get a smaller mortgage to buy the property, and will also need a smaller deposit. You can buy more shares as and when you can afford them – this is called Staircasing – and as you buy more shares, you will pay less rent. You can eventually own 100%.
However to ‘staircase’ first you need be at your property for a certain amount of time – all depends on what your lease company contract is, plus you will occur all fees such as valuation cost, legal expenses, mortgage fees/stamp duty if you re-mortgage. Plus work out if you have enough equity in your property to get a mortgage to buy more shares when the time comes. Then the lease company will except or decline your application. Advice is, to make sure you are aware of the policy of the house /lease company before you buy.
How many times you are allowed to staircase?
You are usually allowed to staircase up to three times, and the third time will take you up to 100% ownership.
Q Is shared ownership is a good idea or is it not worth pursuing?
Pros: Shared ownership has its place when the repayments would be very affordable to you, but it would be difficult to get a big enough mortgage on your own. Or the location needed for school/jobs but can’t afford it. Then yes it is worth pursuing.
Cons: Most shared ownership homes are massively overpriced; especially with the new build properties and your rental share can rise with inflation.
Will I have to pay stamp duty?
The answer to that is yes, if your property you are buying is over £125,000. They are two ways of doing this:
1. Pay in full based on the total market value of the property
2. Pay in stages, first payment is what’s due on the sale amount then nothing until you own 80% of the property.
Cons on this are; if you decide to pay any SDLT due in stages, you’ll pay less to begin with however you may have to make further payments if you increase your share of the property later.