Shared Ownership – Part Buy / Part Rent Your Home
Could Shared Ownership help you buy your first home?
Shared Ownership homes (part buy part rent) are aimed at first time buyers or those who used to own a home, but are unable to buy one at the moment. You are eligible if you have a household income that is less than £80,000 per year (in London it is less than £90,000).
The share of a property typically starts at 25% which you can take out a mortgage for. In addition you be required to pay a reduced rent as well as a mortgage. Shared ownership is a way to get your foot on the property ladder enabling you to buy your first home.
You don’t have to get a massive deposit because you will only need a mortgage for the share you are buying. A part buy part rent home gives you the ability to initially own a share of a property. This is a great option if you are struggling to find the funds for a large deposit or get the level of mortgage you need to buy a property outright where you live.
How does Shared Ownership work?
- You will need to take out a mortgage to pay for your share of the home’s purchase price, or fund this through your savings. Not all lenders offer shared-ownership mortgages so you’ll have to do some research to find out which ones do.
- In many cases you will need to find a 5% deposit on your share of the property.
- The rent is usually less than the rate charged on the open market and usually charged at 2.75% of the property value per annum.
- You will still be liable for all the normal house buying administrative costs such as stamp duty, solicitors fees and moving fees etc should you proceed to part buy part rent one of these homes. However, Stamp Duty tax can generally be deferred until your share reaches 80%.
- You can increase the shares that you own as you can afford to do so, a process known as ‘staircasing’. In most cases you can buy 100% and own the property outright. Please be aware that valuation fees occur when buying additional shares.
- Shared Ownership properties are always leasehold.