Unlocking the door to your dream home: discover 3 essential facts about shared ownership!
The shared ownership program, also known as part-rent, part-buy, is one of several initiatives in England designed to help people who are having difficulty entering the property market.
As the name suggests, you'll initially own a share of your home, rather than 100% of it. For the share you don't own, you'll need to pay rent on it. There are three main costs associated with this scheme:
- The mortgage repayments on the share that you own
- The rent on the share you don't own
- The monthly property service charges
The concept of shared ownership has existed since the 1980s, and there are currently more than 150,000 households in England living in shared ownership homes--about 1% of all households.
Shared ownership is available to a range of different types of borrowers
First-time buyers are eligible for shared ownership. A first-time buyer is someone who has never owned a property at any point in the past and has never owned a home in the UK or abroad (although some banks might also class you as a first-time buyer if you've not owned a property in the past three years).
Shared ownership is also open to previous homeowners who have had trouble getting back on the property ladder.
Your annual income must not exceed £80,000 if you intend to apply for shared ownership, and if you are purchasing in London, the threshold increases to £90,000 per year.
To be eligible for a shared ownership property, you'll need to demonstrate that you're unable to afford a suitable home on the open market. You'll also need a good credit history and not to be in any form of mortgage or rent arrears.
You wont own 100% of your home
Shared ownership offers a form of home ownership to people who cannot afford to buy a property at its full market value. The idea is that this is an affordable alternative onto the housing ladder.
There are some restrictions though:
Usually, you can purchase a minimum initial share of 25%, although it may be possible to buy as little as 10% in some instances. While it was customary to have a minimum share of 25%, nowadays, you may obtain a 10% share. In the case of purchasing a shared ownership resale property, the minimum share you can acquire must be greater than 25%
For a property valued at £300,000, purchasing a 10% share would cost around £30,000, whereas buying a 25% share would require an investment of about £75,000.
The range of initial shares available for purchase varies depending on the property and location, with the maximum typically being 75%. For instance, a 75% share of a £300,000 property would cost £225,000. The minimum share is typically 25%, though in some cases, it may be as low as 10%. Your financial circumstances and the property's eligibility criteria will determine the share you can buy. Note that the share you don't purchase will be owned by either a private developer, local authority, or housing association, while you will be responsible for maintaining and repairing the entire property.
As a homeowner, you're responsible for all repairs to the property, regardless of how much of it you own.
As a shared owner, you may only own a portion of your home initially, but you'll still be responsible for the upkeep and repair of the entire property. Whether it's a broken boiler or a leaky roof, the costs and responsibilities fall on you. However, if you purchased a new shared ownership property since April 2021, you could be eligible to claim repair costs up to £500 a year for the first decade of ownership. These costs can be reimbursed by your housing association or landlord and are in addition to any snagging costs covered by the homebuilder. Any maintenance or repairs needed in communal areas will be covered by the monthly or yearly maintenance charge you pay.