Shared Ownership – All You Need To Know!
2nd Mar 2021
Blocsphere Property Management services cover residential apartment blocks and housing estates, and some of our managed developments are in fact Shared Ownership.
While Shared Ownership offers a great alternative route to home ownership for buyers who are otherwise unable to buy on the open market, it’s always important to understand the facts and figures. We’ve put together this short guide to help you understand Shared Ownership, and what you may be buying into.
What is Shared Ownership?
Shared Ownership gives first time buyers and those that do not currently own a home the opportunity to purchase a share in a new build or resales property.
The purchaser pays a mortgage on the share they own, and pays rent to a housing association on the remaining share. Because the purchaser only needs a mortgage for the share they are purchasing, the amount of money required for a deposit is usually a lot lower when compared to the amount that would be required when purchasing outright.
Purchasers pay a lump sum ‘premium’ to reflect the value of a share in the property; typically, 25%, 50% or 75%. The level of rent set by the landlord is based on the remaining share.
The purchaser has the option to increase their share during their time in the property via a process known as ‘staircasing’, and in most cases can staircase all the way to 100%. In this instance, the shared owner will no longer pay any rent, just their mortgage along with any service charges and ground rent.
When I part-buy/part-rent my home, what am I buying?
Shared ownership properties are always sold on a leasehold basis and the shared owner takes on 100% of the leaseholder responsibilities i.e. the costs of maintaining the internal areas of the property are not shared with the landlord. Shared owners are also required to pay 100% of service charge contributions towards the landlord’s costs of repair and other obligations.
What are the eligibility rules for Shared Ownership?
There are some general eligibility requirements that anyone wishing to buy a Shared Ownership home must meet. The general eligibility criteria for Shared Ownership is as follows:
- You must be at least 18 years old.
- Outside of London your annual household income must be less than £80,000.
- In London, your annual household income must be less than £90,000.
- Shared Ownership purchasers are often first-time buyers but if you do already own another home, you must be in the process of selling it.
- You should not be able to afford to buy a home suitable for your housing needs on the open market.
- You must show you are not in mortgage or rent arrears.
- You must be able to demonstrate that you have a good credit and can afford the regular payments and costs involved in buying a home.
- You will also need access to the deposit amount required. For Shared Ownership, this will usually be 5-10% of the equity share you are buying.
What type of properties can be purchased via shared ownership?
Properties available through the shared ownership scheme are leasehold and, in most cases, are new build or relatively new developments in a cluster of other shared ownership properties. This can either be a new-build estate or a block of flats.
You may have to pay service charges for the maintenance of the common/communal parts on top of your rental and mortgage payments.
Can I sell my home?
Yes you can, if you own less than 100% you will usually be required to give the housing association a period of time to find a buyer, often 6 to 8 weeks, these details will be found in your lease.
Should the housing association not be able to find a buyer then you are free to market yourself. If you own 100% then you can sell without reference to the housing association.
Shared ownership is a specialist product requiring a smaller deposit and lower mortgage payments than owner-occupation / leasehold purchase. It is not necessarily the most appropriate option for all those considering homeownership and you should ensure that the product is fully explained and suitable for your longer term needs before committing to a ‘purchase’.