Shared ownership explained

How does shared ownership work?

Shared ownership combines homeownership and renting. Here's a breakdown of how the process typically works: 

Purchase a share: You start by purchasing a share of the property, which is typically financed through a mortgage. The specific share you buy depends on your financial capabilities. It can range from 25% to 75% of the property's value. 

Pay rent: On the remaining portion of the property that you don't own, you pay rent to a housing association or a similar organisation. This rent is usually set at a below-market rate, making it more affordable. 

Getting a mortgage: To cover the cost of your share of the property, you'll need to secure a mortgage. The deposit and the amount you borrow depend on the percentage of the property you're purchasing. Like any mortgage application, you must meet the lender's eligibility criteria. 

Staircasing: Staircasing is an over time process allowing you to increase your ownership share, typically in 10% increments. The price of additional shares is usually based on the current market value of the property. 

Maintenance and fees: As a shared owner, you are responsible for maintaining and repairing your portion of the property. Additionally, you may be required to pay service charges, which cover the costs of maintaining communal areas within the development. 

Selling the property: You may decide to sell your shared ownership property. The housing association generally has the right of first refusal. It means they get the first opportunity to find a buyer for the property. In the situation where the housing association can't find a buyer, you can sell it on the open market.

Who is eligible for the shared ownership scheme?

Only certain people can buy a shared ownership property asyou have to meet the eligibility criteria. This is as follows:

• First-time buyer: In most cases, shared ownership is designed for first-time buyers. However, some schemes may also consider individuals who used to own a home but can't afford to buy one now.
• Income limits: There are usually income limits to qualify for shared ownership. These limits are in place to ensure the scheme is accessible to those who genuinely need it. Income limits may vary by location and can change over time. 
• Other ownership: You typically must not own another property at the time of purchasing a shared ownership home. This rule ensures that the scheme benefits those without existing housing assets.
• Age requirements: While shared ownership is available to individuals aged 18 and older, some schemes may have specific age-related criteria.

Other criteria might be required such as needing to either live in or work in. It could also be to hold a connection to the area you wish to purchase the shared ownership home.

Which properties are available under shared ownership?

There are specific properties you can buy under shared ownership which will always be leasehold properties. These are as follows:

• a new-build
• an existing home by using a shared ownership resale scheme
• homes which match the particular needs you may have, such as a ground floor flat for a person with a long-term disability

Finding a shared ownership property

If you're eligible for shared ownership, the next step is to find a property. You can search for available shared ownership properties through various channels, including:

• Local housing associations or providers: Housing associations are often the primary providers of shared ownership properties. They can help you find available homes and guide you through the buying process.
• Property websites and real estate agents: Many property websites and real estate agents list shared ownership properties. You can use these resources to search for available homes in your desired area. 
• Government-backed portals: In some regions, the government maintains portals or websites dedicated to shared ownership. It makes it easier to find and apply for shared ownership properties. 

Once you've identified a property you're interested in, it's important to contact the housing association or property seller. You will get more information and express your intent to purchase.

The shared ownership buying process

The process of buying a shared ownership property is similar in many ways to purchasing a traditional home. Here are the key steps:

Mortgage pre-approval: Before you can make an offer on a shared ownership property, you should obtain mortgage pre-approval from a lender. This pre-approval helps you understand how much you can afford. It also demonstrates to the housing association or property seller that you're a serious buyer.

Property search and viewing: Once you have pre-approval, you can begin searching for properties that meet your criteria. Contact the housing association or the seller to arrange viewings. Pay attention to the property's condition, location, and any additional fees or service charges associated with it.

Making an offer: If you find a property you love, you can make an offer to the housing association or seller. They will consider your offer and may negotiate the terms with you. Once your offer is accepted, you can proceed with the purchase.

Legal process: The legal process, also known as conveyancing, involves completing all the necessary legal paperwork. This includes searches, surveys, and the review of the terms of the shared ownership agreement. It's advisable to hire a solicitor or conveyancer to assist with this process.

Mortgage application: After the legal process is underway, you should formally apply for your mortgage. The lender will assess your application and conduct checks. Once approved, he will provide the funds needed to purchase your share of the property.

Property valuation: The lender will also arrange a property valuation to determine its current market value. This valuation helps set the price of your share and any future shares you may purchase through staircasing.

Purchase completion: Once all legal and financial requirements are met, you can complete the purchase. This typically involves exchanging contracts, paying the deposit, and finalising the paperwork.

Moving in: After completion, you can move into your new shared ownership home. You'll start paying your mortgage and rent as per the shared ownership agreement.

Costs associated with shared ownership

Shared ownership comes with several costs. Some of which are similar to those associated with traditional homeownership, while others are specific to shared ownership:

Deposit: You'll need to pay a deposit, usually between 5% and 10% of the value of your share. The exact amount depends on the property and your lender's requirements.

Mortgage Costs: You'll have mortgage repayments, which vary depending on the interest rate, term of the mortgage, and the amount borrowed.

Rent: You'll pay rent on the portion of the property that you don't own, usually to the housing association or the property seller. This rent is set below market rates to make the property more affordable.

Service Charges: Shared owners are responsible for maintaining their portion of the property. This often involves service charges that cover communal area maintenance and other expenses.

Legal and Conveyancing Fees: You'll incur legal and conveyancing fees to facilitate the property purchase. It includes searches, surveys, and the review of the shared ownership agreement.

Valuation Fees: The lender may charge a fee for the property valuation.

Stamp Duty: Like traditional homebuyers, shared ownership buyers may be subject to stamp duty land tax (SDLT). However, there are SDLT exemptions and discounts available for shared ownership properties.

Staircasing: increasing your share

An advantage of shared ownership is the ability to increase your ownership share over time. It's a process known as staircasing. Staircasing allows you to buy additional shares of the property, ultimately leading to full ownership. Here's how it works:

• You can request to increase your share at any time.
• The price you pay for additional shares is based on the current market value of the property.
• Each time you staircase, your rent on the remaining portion decreases.
• You can continue staircasing until you own the property outright.

Staircasing is a flexible way to gradually work towards full homeownership and potentially reduce your ongoing rental payments.

Selling a shared ownership property

If you decide to sell your shared ownership property, there are specific steps you should follow:

Notify the Housing Association: Inform the housing association that you intend to sell your property. They have the right of first refusal. It means they can try to find a buyer before you sell on the open market.

Get a Valuation: The housing association will arrange for a valuation of your property to determine its current market value. This valuation sets the price for your share.

Find a Buyer: Once the valuation is complete, you can actively seek a buyer. If the housing association cannot find a buyer within a specified timeframe, you have the option to sell the property on the open market.

Completion: The selling process, including the legal and financial aspects, is similar to the purchase process. After the sale, you can use the proceeds to invest in another property or for other purposes.