Shared ownership explained

Buying a home can be an exciting but challenging experience, especially if you're a first-time buyer. Shared ownership offers a way for many to step onto the property ladder when homeownership would otherwise be out of reach. But how does shared ownership actually work? What are the eligibility criteria, and what are the costs involved?

At Homeward Legal, we're here to guide you through the process and help you determine if shared ownership is the right option for you. This comprehensive guide will explain the ins and outs of shared ownership, from how it works to how to apply.

In a typical shared ownership arrangement:

1. Buy a share: You buy a share of the property, often through a mortgage. The remaining share is owned by a housing association or a similar organisation.
2. Pay rent on the remainder: You'll pay rent on the portion of the property you don't own. Rent is generally set at a reduced rate compared to local market rents.
3. Staircase to full ownership: Over time, you can buy more shares in the property (known as "staircasing"). This can be done in stages, gradually increasing your ownership until you fully own the property.

Shared ownership is a great way for first-time buyers who can't afford the full cost of a property to get on the housing ladder. However, it does come with certain eligibility requirements and limitations, which we'll cover next.

Learn more about how to staircase shared ownership.

Shared ownership is available to individuals and families who meet certain criteria. These requirements ensure that the scheme benefits those who need it most.

Eligibility criteria:

• First-time buyers: You must be a first-time buyer or someone who has previously owned a property but can no longer afford to buy one outright.
• Income limits: Your annual household income should typically be under £80,000 (or £90,000 in London). This ensures that shared ownership helps those with lower or moderate incomes.
• Mortgage qualification: You must be able to secure a mortgage for at least part of the property. The amount you can borrow depends on your creditworthiness and income.
• Local connection: Some shared ownership schemes prioritise people who already live in the local area or work in the region.

It's important to note that eligibility criteria can vary depending on the region, so it's always a good idea to check with the relevant housing association or local authority.

The costs of shared ownership can vary significantly based on factors like the property's location, your share of the property, and the housing association's rent rates. Here's a breakdown of what to expect:

• Mortgage payment: You will need a mortgage for the portion of the property you are buying. The mortgage payment is based on the purchase price of your share.
• Rent payment: You'll pay rent on the remaining share of the property. Rent is usually set at 2.75% of the unsold equity (the portion you don't own).
• Service charges: In some cases, you will also need to pay service charges for maintenance of communal areas (e.g., lifts, hallways, and gardens).
• Staircasing costs: When you decide to buy more shares (staircase), you will need to pay for a valuation of the property to determine the current market value. Your mortgage lender will then provide the necessary funds for the additional share, and you may incur extra costs such as legal fees and administration fees.

There are several advantages to choosing shared ownership as your path to homeownership:

• Lower initial deposit: Since you're only purchasing a share of the property, the deposit required is typically much lower than if you were buying outright.
• Reduced rent: The rent you pay on the unsold equity is often significantly lower than private rental prices, which helps make your monthly payments more affordable.
• Flexibility: You can increase your share in the property over time, eventually owning 100% of the home if you wish. This gives you greater flexibility and control over your property.
• Government support: Shared ownership is a government-backed initiative, which means you may have access to additional support, such as lower interest rates on mortgages or government grants.

Learn more about shared ownership pros & cons.

Shared ownership is an excellent option for first-time buyers who are struggling to get onto the property ladder. However, it's important to weigh the benefits against the costs and eligibility criteria. If you're unsure whether shared ownership is the right choice for you, speak with a mortgage advisor or a conveyancing expert to discuss your options.

Navigating shared ownership can be complex, but Homeward Legal is here to help. Our expert conveyancing team can guide you through every stage of the process, ensuring a smooth and stress-free experience.

Call  to speak with one of our friendly experts, or get your instant conveyancing quote today.