What does shared ownership involve?
Shared ownership or shared equity schemes are generally run by housing associations (HA) and/or registered social landlords (RSL). Shared ownership means buying a share of your home (between 25% and 75% of the home’s total value) and paying rent on the remaining share. You will need to take out a mortgage in order to pay for your share of the home’s purchase price.
Shared ownership is becoming a most realistic option for many people who are struggling to afford to buy their own home. There are currently a variety of schemes already in existence, and more may well be established. All schemes have common features, such as the buyer paying a reduced percentage share of the property. For example, if the property is valued at £100,000, the buyer may purchase a 40% share for £40,000. The remaining percentage is retained by the HA or RSL and the buyer will pay an annual rent on that share.
The majority of schemes have terms allowing the buyer to pay for further percentage shares as their circumstances change, with the ultimate goal of eventually buying the entirety of the property. However, all of these schemes have quite complicated terms and conditions and there are only a handful of mortgage lenders who will lend money as a part of shared ownership. Each lender will therefore have their own specific requirements for these schemes, meaning it is vital that you seek advice from a solicitor who is experienced in this area.
How do I know if I am eligible for shared ownership?
Not everyone will be eligible for shared ownership or shared equity schemes – there are a few factors to keep in mind. For example:
- If your household earns £60,000 a year or less, OR £71,000 a year or less in London for a 1 or 2 bedroom property, OR £85,000 a year or less in London for a 3 or more bedroom property, you may be eligible for shared ownership.
- If you are a first-time buyer, or you used to own a home but can no longer afford to buy one, you may be eligible for shared ownership.
- If you are currently renting a council or housing association property, you may be eligible for shared ownership.
- If you are aged 55 or over, you can get help from another home ownership scheme called “Older People’s Shared Ownership”. It works the same way as the general shared ownership scheme, however you are only entitled to buy up to 75% of your home. When you own 75%, you will no longer have to pay rent on the remaining share.
- If you have a long-term disability, you may be able to buy a home that is for sale on a shared ownership basis through “Home Ownership for People with Long-Term Disabilities”, also known as HOLD. You are only able to apply for HOLD if the properties available in alternative Help to Buy schemes do not suffice; for example, if you require a ground floor property in regards to your disability.
Shared ownership can be a fantastic way to get on the property ladder. Buying a property may seem like a distant goal to many people, but with schemes in place such as shared ownership and shared equity, you may be able to purchase a home sooner than you think. If you would like further information on shared ownership, please contact our specialist conveyancing team on 01616 966 229 for a free, no obligation initial chat with one of our legal advisors. Alternatively, you can request more information via our online enquiry form.