As we say goodbye to Help To Buy, Centrick have been inundated with questions about other schemes which seek to get first-time buyers on their way to a successful purchase. In this piece, we’ll be answering all of the questions we receive on a daily basis regarding shared ownership!
Shared ownership is a scheme designed to help first-time buyers get onto the property ladder or support those who are struggling to afford a property. Shared ownership purchasers buy a percentage share of their home, usually from a housing association, whilst ownership of the remaining proportion is retained by the vendor. The purchaser then pays a mortgage on their own share of the property and pays a below-market rent to the housing association for the remaining share. This means that the buyer requires a lower mortgage and a lower deposit to get on the property ladder. For example, if you purchase a 50% share of a £150,000 property, you would only need to raise funds for £75,000, of which 10% (£7,500) might be deposit and the remaining 90% (£67,500) would be mortgage. If you were to buy the same property without shared ownership at the same deposit rates you would need a £15,000 deposit and a £135,000 mortgage, which could be much more difficult to access for some purchasers, especially first-time buyers or those with low household income.
Following the initial purchase, the buyer can then purchase additional shares in the property through a process called ‘staircasing’, which can ultimately provide a route to full ownership of the property.
Shared ownership is available for those who would otherwise be unable to afford to purchase a property via traditional means: this makes the scheme available for first-time buyers, or those who have previously owned property which has since been sold and they cannot afford to purchase another on the open market. Eligibility is based on household income, which must be below £80,000 for those buying outside London and below £90,000 for those buying in London.
You will need to fill out a shared ownership application form online via the Help To Buy website: the form will be entitled the ‘Affordable Home Ownership Form’. Alternatively, you can call to request a paper form. You can find the digital version here. Upon completion of the form, you will be informed as to whether you are eligible to partake in the shared ownership scheme.
Upon finding a shared ownership unit that you are interested in purchasing, you should contact the associated selling agent or landlord to formally register your interest and view the property. It is helpful if you have already consulted a mortgage advisor before this stage so you understand precisely how much you can afford to borrow and rent.
Staircasing is the process through which shared ownership buyers can increase the portion of their property that they own. For example, if you purchased your property with 40% mortgage and pay rent on the remaining 60 %, but you wish to increase your share to 50% and rent 50 per cent, you can use the staircasing method to purchase a larger chunk of your property. Homeowners can do this until they own the entirety of their property and pay no rent whatsoever. However, you must be living at the property for a set period of time before you can begin to staircase. You can purchase percentages of your property from the relevant housing association by one per cent at a time, which is much more accessible compared to the previous rules which dictated that ownership must be claimed in chunks of ten per cent. Additionally, to carry out staircasing – which is by no means a necessity for shared ownership homeowners – you will have to hire a surveyor to provide a formal valuation, as the value of your property will likely be different from when you initially purchased it.
There can be a few limitations to staircasing: for example, some units cannot be owned 100%, as this could lead to the re-sale of the property and subsequent purchase by another person as a second home. By capping shared ownership staircasing at 80% ownership, this encourages the unit to be inhabited by local people and families.
Share To Buy has a handy calculator that lets you understand if and when you are ready to purchase further shares in your shared ownership property – you can find it here.
In 2023, a number of changes were instituted to make Shared Ownership even more accessible:
Regardless of what portion of your shared ownership property you own or rent, you can sell at any time. You must contact your housing association in order to confirm your intention to sell, before obtaining a valuation. Your provider or housing association will typically try to find a buyer on their own over the first 8 weeks of your listing going live, but if they do not find an eligible purchaser, you can choose to list your home on the open market with a local estate agent to boost the likelihood of a sale. This process may vary depending on which housing association you purchase from, so it’s a good idea to clarify this information with your chosen vendor at the time of purchase.
Upon listing your home for sale, the property’s new purchaser will go through the same process that you did when you purchased your property. However, remember that the larger the percentage of your property you own and have available to sell, the less affordable it could be to those eligible for shared ownership.
If you’re property has increased in value during your ownership, you will inherit the equity from your share. For example, if your property was originally worth £200,000 and you purchased a 50% share for £100,000, but on the sale of the property it has increased by 10%, your share is now worth £110,000. You will then be able to use this equity as a deposit for your next home.
Shared ownership properties are not eligible for sub-letting, unless there are exceptional circumstances. This is because these properties were built and listed to provide affordable housing and a way to get onto the property ladder, and the subletting process would run contrary to this aim.
Any renovations or refurbishments should be ran past the housing association to which you pay your rent, as they own a portion of the property. Therefore, there should be a consensus regarding any significant amendments to the property. If in doubt, make sure to ask permission!
If you are looking for a shared ownership property to purchase, we recommend consulting your local trusted estate agent to ask what units they have available. We also recommend looking on the Share To Buy website for their most up-to-date listings and advice.
Centrick are your local property experts with an abundance of knowledge on the latest shared ownership regulations. Whether you’re looking for an agent to sell your shared ownership property, are hoping to purchase your first home, or are simply wondering what options are right for you, let Centrick help you make the best decision for your future. Check out our new homes listings here, or use the form below to talk to a member of our friendly team!
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