Shared ownership housing explained
Shared Ownership housing allows you to buy part of a home and to rent the rest.
It means that if you can’t afford to buy a house, either because you do not have enough for the deposit or you cannot raise enough of a mortgage, then home ownership might still be possible.
In this blog, we explain how it works (correct at July 2020)….
Who can apply?
In England the following people can apply for Shared Ownership housing:,
- 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)
- People who rent a council or housing association property
In order to apply, you must be over 18 and you cannot own another home.
If you are separating and currently own a family home, this will need to be on the market before you are considered for shared ownership.
You will also need to be able to show that you are not in mortgage or rent arrears and have a good credit history and be able to meet the costs of buying a property and be able to afford the on-going monthly payments.
You don’t have to be a key worker, such as a nurse or teacher, to apply for shared ownership but military personnel will be given priority over other applicants.
If you’re aged 55 or over, you can get help from another home ownership scheme called ‘Older People’s Shared Ownership’.
How does it work?
With Shared Ownership, you buy between a quarter and three-quarters of a property. Purchasers will pay a mortgage on the share that they own, and a below-market-value rent to a housing association on the remainder.
You will also pay a service charge and ground rent. As the purchaser only needs a mortgage for the share they own, the amount of money required for a deposit is often much lower compared with purchasing a property outright.
You have the option to buy a bigger share in the property at a later date.
Most of the homes available are newly built, but some are properties being re-sold by housing associations.
Advantages of Shared Ownership
- Shared Ownership allows you to get on the property ladder as an owner-occupier, offering long-term stability without overstretching yourself.
- Deposits are generally lower than buying on the open market.
- Shared Ownership makes mortgages more accessible, even if you’re on a lower wage.
- Your monthly repayments can often work out cheaper than if you had an outright mortgage. The monthly payments are also generally lower than if you were to rent privately.
- You have the option to buy more shares of your home in the future via a process known as ‘staircasing’. In most cases, purchasers can staircase all the way to 100%, in which case they are no longer required to pay any rent, just their mortgage along with any relevant service charges and ground rent.
- You can sell the shares you own at any time.
- It may not be necessary to pay Stamp Duty land tax on an initial purchase. For more information see https://www.gov.uk/guidance/sdlt-shared-ownership-property
- Unlike private renting, you have security of tenure. As long as the rent is paid and mortgage repayments are made, you can live in the property for the duration of your lease – this is usually 99 or 125 years. At the end of the lease, the leaseholder can organise an extension with their housing provider.
Disadvantages of Shared Ownership
- Not all lenders offer mortgages for Shared Ownership. Contact a mortgage adviser for advice.
- You have to pay 100% of the ground rent and service charge on your property, however low your share is.
- You will have to pay Stamp Duty on the whole value of the property when your owned share equals or exceeds 80%.
- All properties will be leasehold only, however, some homes can become freehold after staircasing to 100%; this would need to be agreed with the relevant housing provider.
- While you’re free to decorate internally, there may be restrictions on what home improvements you can do. You may need to obtain permission from the relevant housing provider before you make any structural alterations to your home.
How to find out more:
- In Oxfordshire, your first port of call should be the local Help to Buy Agent (they also cover the neighbouring counties), https://www.helptobuyagent3.org.uk/about-us/#contact or call 0800 456 1188.
- The agents are very helpful and will be able to register your interest, organise your application and search for properties. All shared ownership applications go through these agents.
- If you Google ‘Shared Ownership housing in Oxfordshire’, you will also find many housing associations and other agents offering properties. You may use these websites to find your Shared Ownership property, but you will ultimately be routed back through the Help to Buy agents above to complete the paperwork. Not all providers advertise their properties through the Help to Buy website, so it is worth looking at other websites too.
- You cannot complete on your Shared Ownership housing while you own another property, However, you can register your interest and do an affordability check if you do this through the Help to Buy agents.
- Find out if you can get a mortgage. Not all lenders will give you a mortgage for shared ownership but many of the major ones will do so. Speak to a mortgage adviser who should be able to advise you. You will still have to apply for a mortgage to pay for your share, and will have to undergo strict affordability checks by the lender. You will also be expected to be able to provide a deposit.
- Make sure you will be able to afford all the costs of home ownership; including mortgage fees, moving costs, stamp duty, insurance, repairs, maintenance and, if it’s a flat in a block, your service charge. Remember for Shared Ownership, although you own only a share of the property you still have to pay all of the maintenance costs.
If you need help sorting out your finances following separation, please contact me at email@example.com or call on 07706 513496.