Shared ownership

Shared Ownership schemes allow you to part buy part rent a property and are provided by housing associations and can be used for first time buyers.

If you do not have the earnings to buy a property this method of buying allows you to buy a share of your home initially from 25% up to 75% with a deposit and mortgage from a lender and pay an affordable rent on the remaining share.

Shared ownership is available for new build homes and existing homes through housing association resale programmes. Properties in England are always sold on a leasehold only basis and you must purchase the maximum percentage that you can afford.

The price you pay for a property is usually discounted by £10,000 to £15,000 to the market value depending on the location.

You can buy an additional share of your property over time until you own it outright.

Who can apply for shared ownership?

There are a number of criteria to meet before you can consider shared ownership as follows:

No.	Can you apply for shared ownership?
1	You are a first time buyer or if you use to own a home you would qualify if you now can’t afford to buy.
2	You have household income of £60,000 a year or less.
3	If you live in London this is £71,000 a year or less for a 1 or 2 bedroom property or £85,000 a year or less if you live in London and want to buy a 3 bedroom property.
4	If you have a long-term disability under the government’s Home Ownership for People with Long-Term Disabilities (HOLD).
5	You are aged 55 or over.
6	If you rent a council or housing association property.

Many associations give priority to people living in the county or borough of a shared ownership property.

How does it work

For first time buyers or previous home owners that cannot afford to buy shared ownership offers the opportunity to buy at least a 25% share of the equity in the property up to a maximum of 75% initially.

For example, if the property you are buying is worth £200,000 and you decide to buy a 50% share you will need to pay £100,000. You will need a deposit and find a lender for a mortgage in the same way you would buy any other property.

If you have a 10% deposit or £10,000 you will need a mortgage of £90,000. The larger the deposit the lower the interest rate you would pay for the loan as the risk to the lender is reduced with larger deposits.

If you have a deposit of 40% or £40,000 in our example you would be offered the best interest rates on the market from variable, discounted to fixed rate mortgages on a repayment basis which includes interest and capital payments.

Lenders would determine your ability to afford the mortgage taking into account your income and outgoings such as child care, holidays and living costs. If your costs are low you could be offered a multiple of 4 or a maximum of 5 so for a loan of £90,000 your income would need to be from £18,000 to £22,500.

In our example, the remaining £100,000 would have a rental charge and this would typically be from 2.5% to 3.0% depending on the housing association.  So if this was 2.75% it would mean the rent you pay would be £229 per month.

Buying a larger share

You can buy a larger share of your property over time until you become an owner occupier and this is known as ‘staircasing’.

Each housing association with have their own terms regarding how you can purchase a greater share of your property. Usually you can buy 10% tranches after you have lived in the property for a year until you reach 75%. After this level you will need to buy the housing association out of their 25% share in one final amount.

If you are older, aged over 55, the rules are different as the scheme is called the older People’s Shared Ownership’. In this case the maximum share you can have is 75% of your home and once this is attained you will not have to pay rent on the remaining share.

The price you pay for the share will depend on the price of your home at that time based on a valuation arrange by the housing association. The amount you pay will be greater if the value of your home has increased over time, however, you will receive a discount to the market value for the additional share you purchase.

Selling your home

If you own 100% of your property you can sell on the market yourself. The housing association retains the right to ‘first refusal’ on your property for 21 years after you purchase your home outright.

This means they can buy the property back from you first for the market value before you sell it to someone else.

If you only own a share of your property the housing association will find a buyer for the property, such as another shared ownership buyer.

How to apply for shared ownership?

Firstly you need to speak to the Housing Team in your local council of go direct to the housing associations offering shared ownership. If you live in London you can register with First Steps website, the official intermediate housing programme from the Mayor of London or Share to Buy website.

All the housing associations have properties of new build homes and homes through their resale programmes. There are many new build properties and these are all promoted a year or so before the building is complete.

You can find out which schemes you are eligible for as some require you to be living in the same county or borough as the property. This will give you access to a wide range of properties to view.

You don’t need to live in a council owned home to be eligible.

Next you will need to ensure you can afford a mortgage, however, not all lenders offer loans for shared ownership. Lenders also conduct rigorous affordability checks based on your income and outgoings.

In addition to the mortgage you need to have a deposit and have other savings to cover the cost of buying a property such as solicitor fees, arrangement and valuation fees, stamp duty, and the cost of furnishing and decorating your new home.

There are also ongoing costs to be aware of even though you only own a share of your property. You are responsible for the council tax, maintenance costs for your flat and the housing association will apply a service charge, usually from £120 to £180 per month. This covers the costs of running the building such as cleaning, security, lighting and lift services.