As a first time buyer, trying to find a way to save up for a hefty deposit can be overwhelming.
But there are options. One of which is a shared ownership scheme.
What is shared ownership?
Simply put, it is a system by which a buyer purchases a portion of the property and pays rent on the remainder, typically to a local authority or housing association.
Depending on the scheme, the share could be between 25% and 75% of the home’s total value.
You’ll need to take out a mortgage to pay for your share of the home’s purchase price.
Shared ownership properties are always leasehold. Not sure what leasehold means? Read this article that explains the difference between leasehold, share of freehold and freehold properties
Who qualifies for shared ownership?
You can generally buy a home through shared ownership if:
- your household earns £60,000 a year or less
- you’re a first-time buyer (or you used to own a home, but can’t afford to buy one now)
- you rent a council or housing association property
If you’re aged 55 or over you get some added benefits under shared ownership schemes.
It works in the same way as the general shared ownership scheme, but you can only buy up to 75% of your home. Once you own 75% you won’t have to pay rent on the remaining 25%.
Buying more shares
As time goes on you can buy a larger share in your home. This process is called “staircasing”.
When you decide to purchase additional shares, it will depend on the value of your home at the time you are purchasing. So for example, if prices in your area have gone up, the cost of your new share may rise as well. However, if property prices go down then you could pay less for your additional shares.
The housing association will get the property valued and let you know the cost of your new share. You’ll have to pay the valuer’s fee.
What you need to consider before purchasing a home on a shared ownership basis:
- Rent and service charges – Unless otherwise stated, rent and service charges are still payable to the housing association, which can increase over time.
- Mortgage considerations – Shared ownership mortgages can be more expensive and you will need your lender’s consent to staircase.
- Sub-letting – Shared ownership properties cannot be sub-let unless the housing association consents, however refusal is usually only with good reason.
- Selling your shared ownership property – Some housing associations will require you to offer to sell the shared ownership property back to them first for the first 21 years of your outright ownership before you sell it to anyone else. Any alternative purchaser must satisfy the shared ownership criteria before you sell on. If you own a share of your home, the housing association has the right to find a buyer for it
Shared ownership gives first time buyers a chance to take that all important first step onto the property ladder.
If you are interested in purchasing homes under a shared ownership scheme and want to know more, contact us 020 8740 6622
or via email at [email protected]
Or you can ask us your questions about shared ownership via Twitter @northfieldslive
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. Tell us what we can do to help you to buy your first property.