What is shared ownership all about? We’re here to help you understand just that, by rounding up the most common questions regarding the scheme!

Whether you are buying a house outright or through shared ownership there are costs you need to budget for. Two of the biggest costs are  shared ownership solicitors fees and your shared ownership mortgage.

How does Shared Ownership work?

In short, shared ownership means that the home you own is part owned by a housing association. The amount you own will be determined by you when you purchase the property based on what you can afford .In most cases, those buying a shared ownership home will own between 25% and 75% of the full property.

Each month you will pay your mortgage as you would with any other home. However, you also have to pay rent to the housing association for the percentage they own.

Don’t worry! These payments shouldn’t put you off the scheme. As rent and house prices rise the scheme offers a perfect opportunity to get you on the property ladder in the most affordable way. Though, as always, ensure you know what you can and can’t afford, and ask your housing association for help to establish this.

Who is eligible for a shared ownership property?

Shared Ownership homes are not only for first time buyers . It’s a fantastic option for anyone to get on the property ladder, whatever your circumstances may be! Some housing associations may have eligibility criteria, so ensure to do thorough research to avoid disappointment.

General eligibility for shared ownership typically includes:

  • Minimum 18 years old
  • Your household income does not surpass £80,000 outside of London, or £90,000 in London
  • You don’t own any other property, or you’re in the process of selling

How do I get a mortgage for a shared ownership property, and what amount could I be paying?

Shared ownership mortgages are becoming more readily available on the high street, with popular banks like Barclays and Halifax offering the exclusive service. It’s important to get a deal that suits you, so ensure you do thorough research and use price comparison sites where applicable.

Legal and General offer a great shared ownership affordability calculator, where you can input your details to understand the savings required to get the process started, and potential monthly costs.

What sort of deposit would I need for shared ownership?

Another benefit of shared ownership is that you don’t need to save as much of a deposit. Firstly, you only need to save the percentage of the amount of property you are buying (for example 50%) instead of the total property value.  Secondly, most shared ownership mortgages only require a 5% deposit of the value of the property rather than the standard 10%. So you could be moving sooner than you think!

Let’s break it down:

As an example, let’s imagine you were buying a 50% share in a home valued at £150,000. This means you would only need a deposit of £3,750 (5% of £75,000) for the mortgage.

Don’t forget you will also need some cash for shared ownership solicitors fees and moving costs but still we hope that gives you an idea of how accessible owning your home can be.

How is the rent that I need to pay for my shared ownership property to the housing association calculated?

The process of calculating rent for shared ownership is a complicated one. In order to simplify it, we will use a theoretical house with a value of £150,000 which you own 50%. As a result of your 50% ownership, the housing association owns a value of £75,000. This is the key basis needed for all calculations. To work out your rent they would calculate:

£75,000 ÷ 100= £750
£750 x 3= £2,250
£2,250 ÷ 12 (months) = £187.50

This means that, in addition to mortgage payments, monthly rent would be £187.50.

3% is the typically calculated % of the portion of the property owned by the housing association which the leaseholder has to pay in rent; this may vary so make sure to check this first.

Are shared ownership properties leasehold?

Most shared ownership properties are leasehold. A leasehold means you have been ‘leased’ the land in which a property is built for a fixed period of time. Due to the way the lease is structured, you will be required to pay a service charge for the upkeep of the grounds. Ensure you factor this additional cost before taking on this type of property!

If you need to find out more about shared ownership leasehold, there are some helpful sites available online, such as The Leasehold Advisory Service.

So what do you pay monthly for a shared ownership home?

You need to budget for mortgage, rent and service charge payment.

What is Shared Ownership staircasing and how does it work?

Once you are in your home you are typically eligible to buy more of your home you can. This is known as staircasing. This means increasing the share that you own, with the government recently announcing new legislation to allow increments of 1%. Your housing association may have specific amounts, so ensure you look into this.

It’s important to remember if you are remortgaging to buy more of your property you will need to demonstrate your affordability. You will also need to pay to have your house revalued, so ensure you have established if the share increase will be valuable in the long run if you hope to do it again.

Can shared ownership staircasing allow you to buy 100% of the property?

Speak to your housing association to understand what the options are to staircase your home. They may have specific amounts you can staircase at a time.

You will need to pay to have your property valued. This is because the value of the property could have changed since you originally bought it.  The property may be worth more now in which case it will be more costly to buy a bigger share than it would have been when you decided to part buy / part rent it in the first place. However, the good thing is here that your initial share will be worth more than you paid for it.

Of course, the value could also decrease which would mean your initial share is not worth as much as you originally paid for it. However, you could buy a bigger share cheaper than you could when you first agreed to part buy / part rent.

If you staircase your shared ownership home to 100% you become an outright owner, and pay no rent. However, if it remains leasehold you will still need to make payments. This money goes to those who own the land your property is built on typically for maintenance and ground rent.

It is important to bear in mind that you may face other costs to staircase your home. This includes legal fees, mortgage arrangement fees as well as additional valuations in the case of valuer disputes or expired valuation reports.

However, one of the major positives will be the bigger share of the property you own, the less rent you will be paying the housing association.

How does leasehold work if I buy the original shared ownership home 100% outright?

If it is a flat you own it is likely you will still need to pay service charge as your housing association may remain the freeholder of the block of flats or apartments. If you own a house you may be able to get the freehold transferred over to you. Check with your housing association to see what their rules are.

Why is shared ownership a popular choice with first time buyers, downsizers and those who have had relationship breakdowns?

Shared ownership allows middle and low income earners the opportunity to buy their own home. It also means you can do so with a little less risk. So you don’t have to save for a large deposit and potentially get on the home ownership ladder a little quicker. It’s also a great way to see if you could manage the full expense of owning your own home outright.

Are you interested in a Shared Ownership property? What are you waiting for?! Start your search for a shared ownership properties today.