Jane McGowan reports on the benefits of shared ownership...
Often described as a cross between buying and renting, shared ownership is a government scheme affording would-be homeowners the chance to take their first steps on to the property ladder.
Aimed at people who may not earn enough to raise a large deposit for a house or apartment outright, shared ownership or help-to-buy schemes enable people to purchase a percentage of a property, thus keeping mortgage payments in check. Rent is then paid on the outstanding amount to the local Housing Association and there is the option to buy a larger share from the HA should you be able to at a later date.
“Shared ownership is the ideal for people who don’t require social housing but may not be able to afford property on the open market,” explains Jade Turnstill, digital marketing & communications executive at Share to Buy. “It offers people a way to get on the property ladder and gives them financial security.”
In England, the properties are usually (but not exclusively) new builds and are available on a leasehold basis only. Rules on eligibility are also quite stringent:
- Earnings (for all parties) must not total more than £80,000 – rising to £90,000 for London boroughs
- First-time buyers or people who may have owned their own home in the past, but can now not afford to do so
- You currently rent a housing association or council property
There is no age bar to shared ownership – however, if you are over 55, you will qualify for a slightly different help-to-buy scheme (Older People’s Shared Ownership) which only allows you to purchase 75% of the property value. But once you have reached 75%, you will no longer be required to pay rent on the outstanding debt.
There are numerous benefits to shared ownership: at around 2.75% of the property value per year, rents to the housing association are typically much lower than those in the private sector; the cash deposit can be as little as 5% of the share you are hoping to purchase; and you can purchase a small amount - as low as 25% - to ease the financial burden. And you can even defer paying Stamp Duty until your share hits the 30% mark.
Recent changes to development rules regarding affordable housing mean a good number of shared ownership properties are in some very attractive residential areas.
Jade says: “By going down the shared ownership route, buyers can afford much more. For example, on a £500,000 house, a deposit would normally be around £125,000. But if you are only buying 25%, that brings your deposit down to £6,025, which makes a big difference.”
However, you should remember that checks are made on your eligibility and you will be asked to prove that you have sufficient funds (typically around £4,000) that can be accessed easily to facilitate your house move, as well as the cash deposit. It’s also worth noting that your credit history will be checked to determine whether you can keep up with repayments and any bad debts, which may put an end to the whole process.
To find out more, visit: helptobuy.gov.uk
