What Does Shared Ownership Mean?

The Shared Ownership scheme has been around for as long as the 1970s, so it’s likely that you’ve heard it mentioned in one context or another. Until you come to buy a property however, you may not have known exactly what it is.

There are a few different schemes out there for people to make use of when taking the first step onto the property ladder, and Shared Ownership is the most common affordable purchase option. But what does Shared Ownership actually mean?

What is Shared Ownership?

Shared Ownership means that you purchase a percentage of a property and pay rent for the remaining percentage that you don’t own. A Housing Association or local authority assesses you to confirm you are eligible, and upon being approved you are required to pay for your share either by cash, or a mortgage, and be able to afford the rent for the percentage you don’t own.

These values vary depending on what you can afford, but most commonly you can purchase between 30-50% of a property. Once you have owned your share for a fixed period of time, you have the option to ‘staircase out’ and buy further shares. The larger the percentage of the property that you own, the less that the Housing Association owns. This means the rent you pay to them also decreases. Over time if you continue to staircase, you can own more and more and eventually 100% of the property.

For example, you earn £23,000 a year and you’re currently paying £700 a month in rent. You have a clean credit history and want to get on the property ladder. You find a Shared Ownership property for £58,500. The full market value of the property is £195,000, of which 30% can be bought and the remaining is owned by the Housing Association. You will need to pay £370 in rent. To purchase the 30% share, you can put down a minimum deposit of £2,925 (5% of £58,500), £2,000 to cover your solicitor fees and £349 for using a mortgage broker’s services in order to find the right mortgage deal. The total upfront amount you’ll need to find to buy shares in the property is £5,274.

With this example in mind, it usually means you pay less on your mortgage and rent payments with Shared Ownership than you would renting. Not only that, but because you only need a mortgage for the share that you are purchasing, the amount of money required for a deposit is usually much lower than would be required when purchasing outright. There are even other options you could explore where currently you don’t even need to find the deposit money for a Shared Ownership property, making this scheme all the more affordable.

What are the benefits of Shared Ownership?

It is specifically designed for those on a lower income and struggling to save for a 10%+ deposit to buy a home, so it opens up a door to the housing market – an opportunity which may have been very difficult for many individuals to reach otherwise.

If you are exploring the idea of Shared Ownership to get on the property ladder, the chances are that you have not moved out of the family home yet, or you are currently renting. If you are currently renting, Shared Ownership may actually prove to be a cheaper alternative in terms of monthly outgoings. It can often work out less expensive and those monthly payments will be going towards paying off your mortgage instead of your landlord’s. Although you will still be paying rent (to the Housing Association), it’s generally less than the rent charged on the open market. You would usually be looking at 2.75% of the property value per annum.

You cannot buy any house on the market using the Shared Ownership scheme – they must be a registered Shared Ownership property. However the good news is that Shared Ownership properties can be found on new housing developments, usually purpose-built in sought-after areas. Housing developments are required to build a certain number of Shared Ownership homes as part of the planning permission. For this reason, many Shared Ownership properties are new builds. You can also find resale Shared Ownership properties on the market. These are homes that the current owner bought through the scheme and now wishes to sell on. Check out Share to Buy to browse Shared Ownership properties near you.

Can anyone use the Shared Ownership scheme?

There are a few requirements for being eligible for the Shared Ownership scheme. Firstly, you must be at least 18 years old with a household income of less than £80,000 a year (or £90,000 in London). Commonly, the scheme is used by first time buyers, existing Shared Ownership property owners or someone who used to own a home and now cannot afford to buy a new one.

When applying for a Shared Ownership property, certain applicants may have priority over others. For instance, if someone already lives or works locally, or with close family connections in the area then this will work in their favour. Military personnel can also be given priority, along with General Needs Housing Tenants looking to vacate their property to move into a Shared Ownership property.

It can be a little more difficult (but not impossible) to qualify for the scheme if you have unsettled county court judgements (CCJs) in your name, have been made bankrupt or had an Involuntary Arrangement in the last three years, had your home repossessed within six years before your application, already own a home that you can’t/won’t sell, or if you have mortgage arrears from the past 12 months. Generally speaking though, if you are eligible for a mortgage then you shouldn’t have any problems.

How Mortgage Light can help

When making use of the Shared Ownership scheme, you will need a Shared Ownership mortgage. These are not always easy to come by, so turn to us at Mortgage Light and we will find you the right deal for your exciting new chapter. We have a lot of experience with Shared Ownership mortgages, having dealt with them since we began trading. We have even helped many people to own 100% of their property after only a few years, depending on their circumstances.

Contact us today for help securing the right Shared Ownership mortgage for you. We’re here to help you with any questions regarding the Shared Ownership scheme, and how to make this opportunity work best for you.