Many people looking to buy property will need a helping hand to achieve home ownership. Shared ownership is one of a handful of initiatives available to help people on their way to owning a home of their own. In this article we explore what it is, and if it’s worth it for you.
What is shared ownership?
Shared ownership allows a first-time buyer the opportunity to purchase shares in a property they would not normally be able to afford without financial support. As the name suggests, you will share ownership of the property which makes securing a mortgage more accessible. Your mortgage contributions will be lower than if you owned the whole property. However, you will also need to factor in paying a ground rent which goes to a housing association.
What is staircasing
Many people could be put off because of having to share ownership of their home. Thankfully for those people there is an option to increase ownership over time. Aptly named, this process is called staircasing and means that over time you may be able to own the property outright. Once you have brought 100% of the value of the property it will be your home.
Are there downsides to buying a shared ownership home?
As with everything, there are a few things that people may deem to be downsides with shared ownership. Here we explore what a few of them are so you can be prepared:
- The lease
Properties that are shared ownership will be leasehold properties. Houses with less than
80 years left on their mortgages are much harder to sell as they become less desirable to possible owners. You should make sure you are able to extend the lease if you find yourself in this position. - You’re still classed as a tenant
Despite being part-owner of a shared ownership property you still fall under certain rules that someone who is renting does. You should ensure you can pay both the rent and mortgage payments before you enter into a shared ownership scheme. As you are still classed as a tenant it means you could still be evicted by the housing association until you own 100% of the property. - Stamp duty
For buyers purchasing their first homes stamp duty will not affect them. However, when buying a shared ownership property this option does not always apply. You will have two options to pick from when deciding how to tackle the associated stamp duty. The first is pay for it up front, and the other is to pay it on only your portion of the property. If you opt for the later the stamp duty exemption will not apply to you. - Service charge
When you live in a leasehold property you will be expected to pay a service charge. This service charge is what funds the upkeep of the property ensuring you live in a well-maintained property. You should fully understand what your contributions are funding and who is responsible for what before you purchase. - Sub-letting
Many people find that letting out their home to be useful in certain circumstances. However if you have not yet staircased your way to 100% ownership you will not be able to let your property out. Fortunately if you are after some additional income and you are still living in the property you will be able to let out a room in your property to a lodger.
What are the eligibility rules for shared ownership?
Criteria may change from one housing association to the next. In most cases to qualify for shared ownership these are some general criteria that are likely to apply:
- You should be at least 18 when applying
- If you live outside of London you should earn no more than £80,000
- If you live in London, you should earn no more than £90,000
- If you already own a home you must be in the process of selling
- You must not be able to afford a property suitable for you without support
- You will need to show you are able to afford your repayments
If you want help securing your property with shared ownership then Choice Mortgage Solutions are here to help. Get in touch with us today to find out more about shared ownership and whether or not it’s right for you.