What is shared ownership?

Shared ownership offers a viable path to homeownership for individuals who may find it challenging to purchase a property outright. This scheme, part of the UK government's range of initiatives to help people buy a home, provides a stepping stone into the property market. Below, we'll explore how shared ownership works, the eligibility criteria, recent changes to the scheme, and the pros and cons to consider.

What is the meaning of shared ownership?

The shared ownership scheme allows you to purchase a portion of a property, ranging from 10% to 75% of its value, by using a deposit and securing a mortgage for that share. The remaining share is rented from a landlord, typically a housing association or local authority. This means you pay both a mortgage and rent.

Eligible properties are generally new-build, leasehold homes, granting you ownership of the lease for a specified duration. The minimum leasehold term for shared ownership properties has now been extended to 990 years. Shared ownership includes service charges to cover maintenance and other communal expenses.

Who Qualifies for Shared Ownership Schemes?

Eligibility for shared ownership is designed to assist those who cannot afford to buy a home outright. Key criteria include:

  • A household income below £80,000 (or £90,000 within London)
  • Applicants must be over 18
  • Not currently owning another home, either in the UK or abroad, unless in the process of selling it

This scheme is open to first-time buyers, those who have previously owned a home, and current shared owners looking to move.

What Are the Pros and Cons of Shared Ownership?

Advantages

  1. Lower Deposit Requirements: A 5% deposit is often sufficient, making it more accessible than buying a property outright
  2. Staircasing: You can increase your ownership share in the property over time, sometimes by as little as 1% increments in the first 15 years
  3. New Build Benefits: These properties often have lower running costs
  4. Essential Repairs: For the first 10 years, landlords are responsible for up to £500 per year in essential repairs

Negatives

  1. Service Charges: Monthly fees for ground rent and property maintenance are an additional cost
  2. Cost of Staircasing: Increasing your share involves costs such as stamp duty, valuation fees, and legal expenses
  3. Selling Complexity: Selling a shared ownership property can be more complicated than selling a fully owned home
  4. Rent Increases: Rent can increase annually, and failure to pay can result in eviction despite owning a share of the property

Can I Apply to the Help to Buy Scheme?

No, unfortunately the government’s Help to Buy scheme closed in 2022. The Help to Buy ISA topped up people’s savings to buy their first home, and the Equity Loan scheme offered additional funding to homebuyers, with no interest to pay for the first five years of loan repayments.

Frequently Asked Questions

Is It Hard to Sell a Shared Ownership Property?

Selling a shared ownership property can be more complex than selling a fully owned home. If you don't own 100% of the property, your housing association or local authority has the first right to buy it or find a buyer. If they cannot find a buyer, you can sell the property, but the buyer must meet the shared ownership eligibility criteria.

Do You Pay Rent on Shared Ownership?

Yes, rent is paid to the landlord for the portion of the property you do not own. The maximum rent landlords can charge is 3% of their share's value.

Do You Need a Mortgage for Shared Ownership?

A mortgage is required to purchase your share of the property. Shared ownership mortgages are available from selected lenders.

Who Pays for Maintenance on a Shared Ownership Property?

Previously, shared owners were responsible for all service and maintenance charges. However, this changed in 2021. Landlords now contribute to essential repairs, covering up to £500 per year for the first 10 years of ownership, regardless of their share size.

Does Shared Ownership Rent Increase?

Yes, landlords can review and increase rent annually, but it cannot exceed 3% of the unowned share's value.

Find out more about shared ownership with Felicity J. Lord

If you are considering buying through the shared ownership scheme, contact your local Felicity J. Lord branch today. We combine excellent knowledge of the local market with professional expertise in all aspects of property, ensuring you receive the best possible service when buying or selling.