What is shared ownership

Shared ownership is a government backed scheme designed to help people who may not be able to afford to buy a home outright. Shared ownership allows you to purchase a share of a property (typically between 10% and 75%) which is owned by a housing association or developer.

Every month, you then pay a mortgage on the bit you do own plus rent on the share you don’t. For this reason, it’s also known as ‘part rent, part buy’.

Start off buying just a ‘share’ of a property and over time you can add to what you own until it’s entirely yours through a process called ‘Staircasing’.

How does the scheme work and what might it cost?

When you buy a share of the property, it’s made up of your deposit and mortgage (just as if you were buying a home normally). But the amount you’ll need for each are much smaller. Why? Because they’re worked out on your portion of the home. Not the full price.

For example if you buy a 25% stake in a £200,000 flat. This would cost you £50,000 in total, so you might put down a 10% deposit of £5,000 and take out a £45,000 mortgage for the rest.

On top of this monthly mortgage payment, you’ll also need to pay a monthly rent to the housing association.

This is worked out as a percentage, usually between 2% and 3%, of the share you don’t own. So in this example, 3% of £150,000 is £4,500 rent a year – or £375 a month.

You will have other costs to cover too. Since shared ownership properties are leasehold, you’ll have annual ground rent and monthly service charges. Don’t forget Stamp duty there are two ways this can be paid. Find out here.

Who Can Apply?

You can buy a home through shared ownership if both of the following are true:

• your household income is £80,000 a year or less (£90,000 a year or less in London)
• you cannot afford all of the deposit and mortgage payments for a home that meets your needs

One of the following must also be true:

• you’re a first-time buyer
• you used to own a home but cannot afford to buy one now
• you’re forming a new household – for example, after a relationship breakdown
• you’re an existing shared owner, and you want to move
• you own a home and want to move but cannot afford a new home that meets your needs

What is staircasing?

Once you have lived in your Shared Ownership home for a certain period of time (as outlined in the terms of your lease), you can choose to buy further shares in your property.

Known as staircasing, this process allows shared owners to build the percentage share that they own in their home with most being able to staircase all the way up to 100% ownership.

Whether it’s from savings, a work promotion or extending the mortgage you could find yourself able to bump up your share in chunks of 1%, 5% or more.

How much it costs to buy the extra will depend on the value of your property when you decide to boost your share. not the price when you first bought the home.

Using the same £200,000 example as above, imagine you wanted to boost your 25% stake to 40%. You discover its market value is now £220,000 – buying 15% extra at this higher price will cost more than it did before.

You’ll also have to pay admin and legal fees each time you build up your stake. However, since you own more of the property, you’ll pay less rent in turn.

Can I do what I like with my shared ownership home?

You can make changes like any other homeowner. But your lease may limit what you are able to do

There are usually no problems decorating how you like. Structural changes however, like knocking a wall down, might need approval.

To make sure you know exactly what you can and cant do. Always read the terms of the lease and look through the restrictive covenants before you buy

Will I be able to sell my home when I want?

You can, but how easy it might be will depend on how much of your property you own.

If you’ve made your way to 100% ownership, you’re usually free to sell the property as normal via an estate agent (though some types of lease may say your housing association gets first dibs, so check).

If you’re still in shared ownership first alert your housing association, who will try to sell it to another shared ownership buyer. If they can’t find a buyer, you can then take it to an estate agent or market it yourself. How much you make will depend on the final sale price, and the share you own.  

Is shared ownership right for me?

Becoming a homeowner is a dream for many, and shared ownership can be a great option if you have a small deposit.

However, there are additional factors to consider, such as rent payments, staircasing costs, and leaseholder fees.

Being fully prepared for these responsibilities is essential.

If you decide to move forward, ensure your solicitor or conveyancer thoroughly reviews your contract and explains every clause in simple terms, so you understand exactly what you’re agreeing to.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.