If you are looking to own your own home but are unable to afford the mortgage on 100% of the value, the Shared Ownership Scheme will allow you to buy a share of a property and rent the remaining share at a reduced rent.
Below we look at how this works and who is eligible. This scheme applies in England only, although there are similar schemes in Wales and Scotland.
What is the Shared Ownership Scheme?
The Shared Ownership Scheme is one of the government’s “Help to Buy” home ownership schemes. As a government-funded programme, the scheme is aimed at people who don’t earn enough to buy a home outright.
By part buying and part renting, it is primarily designed to help people get onto the property ladder by reducing the cost of ownership. However, you will still need to take out a mortgage to pay for your share of the purchase price of the property, or fund this through your savings.
Under the scheme you will be able to purchase a share of a property of between 25% and 75%. For any outstanding share you will be liable to pay rent, albeit at a reduced rate.
As the Shared Ownership Scheme works on the basis of part buy/part rent, you will be buying your share of the property on a long leasehold, rather than a freehold basis.
Who is eligible under the Shared Ownership Scheme?
You will be eligible to buy a share of a property under the Shared Ownership Scheme if your household earns £80,000 a year or less, or £90,000 a year or less in London, and any of the following apply:
You are a first-time buyer
You used to own a home, but can’t afford to buy one now.
Accordingly, the scheme is not solely reserved for first-time buyers, but rather for anyone who does not own property in the UK or abroad, and who cannot afford to buy 100% of the property value.
You will also be eligible if you are an existing shared owner in the process of selling and buying your property, provided that you satisfy the financial criteria and cannot afford to buy 100% of the new property value.
What types of property are included under the Shared Ownership Scheme?
Under the Shared Ownership Scheme you can buy a newly built home, or an existing one through resale programmes from housing associations, although property under the scheme tends to be more widely available within newly built developments.
Further, the scheme will allow you to purchase various types of property, including a house, bungalow or flat. To search for eligible properties under the Shared Ownership Scheme visit: https://www.sharetobuy.com/.
The “Share to Buy” website is a national online property portal for affordable home ownership schemes where you can search for homes based on location, bedroom numbers, deposit amount and other key criteria.
Can I buy more shares under the Shared Ownership Scheme?
Having purchased a property under the Shared Ownership Scheme, you will have the opportunity to buy more shares if you so choose at a later date. This is known as staircasing.
Under the staircasing provisions you can opt to buy up to 100% of the property’s value, thereby owning the property outright. However, the cost of your new share will depend on the value of your property at the point at which you want to buy that share.
In the event that your property has increased in value, this additional share will cost more than you paid for any share purchased first time round, and vice versa.
A professional valuation will be arranged by the housing association who own the remaining share, although you will be responsible for the cost of the report, together with any legal fees associated with making the additional purchase.
If you choose to increase your ownership share, your monthly mortgage payments will increase, unless you can pay in cash, and your rent will decrease accordingly until the stage where you own 100% of your property.
Can I sell my property under the Shared Ownership Scheme?
It is possible to sell any share of a property owned under the Shared Ownership Scheme. However, the housing association owning the remaining share has the right to buy it first. This is known as first refusal.
The housing provider will also have the right to find a buyer for your home. If, however, you own 100% of your home, you are free to sell this yourself.
Should I seek expert advice when buying under the Shared Ownership Scheme?
If you choose to proceed with the purchase of a share of a property, you should also seek expert financial advice to discuss your finance options, and instruct a specialist lawyer or conveyancer to act on your behalf.
Buying a property, or even a share of a property, is one of the most expensive purchases you will probably make in the course of your lifetime. As such, you should ensure that you are making the right decision, that the property is suitable for your needs and that you can afford the repayments.
Legal disclaimer
The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal, financial, or other expert professional advice, nor is it a complete or authoritative statement of the law and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.
