Understanding Shared Ownership
Shared ownership is an option offered by many developers as part of the government’s Affordable Homes Scheme. If you’re unsure what shared ownership entails or whether it’s right for you, this guide outlines the key details, which may help you decide.
What is Shared Ownership?
Shared ownership, sometimes referred to as ‘part buy, part rent’, allows you to purchase a percentage of a home’s market value initially ranging from 10% to 75%. For the portion you don’t own, you’ll pay rent to a landlord, typically this is via a management company (though not always).
In the future, you may then have the option to buy more shares in your home through a process called ‘staircasing’. With each additional share purchased, your rental payments decrease as your ownership increases.
Am I Eligible?
You can apply for shared ownership if the following apply:
- Your household income is £80,000 or less per year.
- You cannot afford the full deposit and mortgage payments for a home that meets your needs.
In addition, one of these criteria must also be true:
- You’re a first-time buyer.
- You previously owned a home but cannot afford to buy one now.
- You’re forming a new household (e.g. following a relationship breakdown).
- You’re an existing shared owner looking to move.
- You own a home and want to move, but cannot afford a new one that meets your needs.
If you already own a home, please note that you must complete its sale before purchasing a shared ownership property.
Costs and Fees
When purchasing a shared ownership home, you’ll typically encounter:
- Reservation Fee: A fee (up to £500) paid to the landlord, deducted from the final cost upon completion.
- Deposit: Usually 5-10% of the share you’re purchasing, but you will need to confirm the required amount with the seller.
- Legal Costs: Similar to buying any home, solicitors’ fees, stamp duty (if applicable), and other purchase-related costs, such as surveys will apply.
Additionally, you may need to pay service charges, ground rent, and/or estate management fees during your ownership (depending on the property). Typically these charges are reviewed annually and the landlord will confirm the amount and payment frequency.
Benefits of Shared Ownership
Shared ownership offers several advantages, such as:
- Affordability: It allows you to buy a home you might not otherwise afford.
- Security: Unlike renting, owning a share provides more stability. As long as you maintain your rent and mortgage payments, you can remain in the home for the duration of your lease.
- Staircasing: Over time, you may be able to increase your ownership of the home, reducing rent owed. Staircasing to 100% will also mean that you become the sole homeowner, eliminating rent payments entirely.
Final Thoughts
Shared ownership is a valuable pathway to homeownership for those who can’t afford to buy outright. While it has its unique costs and considerations, it can provide a stepping stone toward owning your dream home.
For more detailed information about purchasing a shared ownership property, visit the government website
