Shared ownership hip is an innovative approach to home buying that makes property ownership more affordable and attainable. This post will guide you through the details, including what shared ownership involves, its pros and cons, the application process, and more.
1. Shared Ownership: An Introduction
Shared ownership is a scheme typically run by housing associations. It allows you to buy a share of a property (usually between 25% and 75%) and rent the rest at a discounted rate. This hybrid model of ownership and renting provides a stepping stone to complete homeownership.
2. The Pros of Shared Ownership
There are several benefits to shared ownership. First, it lowers the initial cost of homeownership, as you only need a mortgage for the share you’re buying, not the entire property. It also reduces monthly payments because you’re paying rent on a reduced rate for the remainder of the property.
3. The Cons of Shared Ownership
Shared ownership isn’t without its drawbacks. For instance, you’ll need to pay maintenance fees, and your options for remortgaging or selling the property can be limited. You’ll also have to buy more shares in the property over time, potentially at a higher price.
4. Who Can Apply for Shared Ownership?
Shared ownership schemes are usually open to first-time buyers, those who used to own a home but can’t afford to buy one now, and people who currently rent a council or housing association property. Some schemes also have income caps.
5. How to Apply for Shared Ownership
Applying for shared ownership usually involves finding a housing association running a scheme, checking their eligibility criteria, and completing an application form. You may need to secure a mortgage for your share of the property as well.
6. Staircasing in Shared Ownership
“Staircasing” is the process of buying more shares in your property. It’s one of the significant advantages of shared ownership, as it provides a pathway to complete homeownership. However, the cost of additional shares may change over time, depending on the property’s value.
7. Selling a Shared Ownership Property
Selling a shared ownership property can be more complex than selling a fully-owned one. The housing association usually has the ‘right of first refusal,’ meaning they have the chance to find a buyer before you put it on the open market.
8. Shared Ownership vs. Help to Buy
Shared ownership is often compared with the government’s Help to Buy scheme. The key difference is that Help to Buy offers an equity loan for a part of the property’s cost, whereas shared ownership involves part-buying, part-renting the property.
9. Changes in Shared Ownership Rules
The shared ownership scheme has undergone several changes over the years. Most recently, the minimum share you can buy was reduced from 25% to 10%, making it even more accessible for potential homeowners.
10. The Monthly Costs of Shared Ownership
In addition to your mortgage and rental payments, there are other monthly costs involved in shared ownership. These include service charges for maintaining communal areas and buildings insurance, along with your regular utility bills and council tax.
11. Shared Ownership and Stamp Duty
Understanding how stamp duty applies to shared ownership properties is essential. Initially, you can choose to pay stamp duty only on the share you’re purchasing or on the property’s total value. If you decide to pay stamp duty on the total value upfront, you won’t need to pay any more stamp duty when you buy additional shares, unless the property’s value has significantly increased.
12. The Leasehold Aspect of Shared Ownership
Shared ownership properties are usually leasehold. This means you have the right to occupy the property for a set term, typically 99 or 125 years. As a leaseholder, you must comply with the terms of the lease, which could include restrictions on subletting or keeping pets.
13. Shared Ownership and Inheritance
Inheritance can be a complex issue with shared ownership. If you pass away, your share of the property will form part of your estate. The remaining share owned by the housing association will not be affected. You should seek legal advice to understand the implications fully.
14. Shared Ownership with a Partner
If you’re buying a shared ownership property with a partner, you can choose to own the property as ‘joint tenants’ or ‘tenants in common.’ Joint tenancy means you both own the entire property together, while tenants in common means you each own a specific share.
15. Choosing the Right Mortgage for Shared Ownership
Not all mortgage providers offer shared ownership mortgages. It’s essential to shop around and find a lender that suits your needs. An experienced mortgage advisor can help you navigate this process.
What happens if I can’t pay my shared ownership rent?
If you’re unable to pay your rent, it’s crucial to contact your housing association immediately. They can provide advice and may be able to help you manage your payments.
Can I decorate my shared ownership property?
Yes, you can make internal decorations and changes to your shared ownership property. However, you usually need permission for major alterations or extensions.
What is the minimum share I can buy in a shared ownership property?
As of recent changes, the minimum share you can buy in a shared ownership property is 10%.
Can I buy 100% of my shared ownership property?
Yes, through the process known as ‘staircasing,’ you can eventually own 100% of your shared ownership property.
Shared ownership provides an affordable pathway to homeownership, opening doors for those who may find it challenging to enter the property market. By understanding its ins and outs, you can decide if it’s the right route for you.
