Shared ownership is a scheme backed by government and local authorities to help more people onto the housing ladder. You purchase a ‘share’ of the home with a deposit and mortgage, you then pay ‘rent’ on the percentage share you do not own. The shared aspect does not relate to sharing a home or buying with a party; it’s owning a percentage share of the property.
Are there eligibility requirements for Shared Ownership?
Normally yes, the eligibility requirements are set by the housing association or local authority that will continue to own the percentage of the share that you are renting. These schemes are normally limited to first time buyers and have maximum household income limits.
How much deposit do I require for shared ownership?
As a general rule you need a minimum of 5-10% of the share you are purchasing.
For example; if the shared ownership property you are interested in is £200,000 gross price, you want to purchase 40% share = £80,000 share, you will require 5% of this share which is a £4000 deposit and a £76,000 mortgage. You will then pay rent on the 60% of the property, this is normally 60% of the monthly rental value. For affordability the lender will take into account the mortgage payment and rental income
Can I purchase more shares in my property?
Yes, normally housing associations want you to be in the property for a minimum of 12 months before you purchase additional shares in the property. This term in the industry is called ‘staircasing’. You can ‘staircase’ up to 100% of the property value with a mortgage assuming this meets lender affordability and criteria requirements so you eventually own the property outright.
Can I sell a shared ownership property?
Yes, rather than ‘staircasing’ some individuals sell the property on a shared ownership basis and use the equity they’ve obtained in the property by the value increasing and decreasing the mortgage, to purchase a property without shared ownership. These schemes are to help you on the property ladder.
If the value increases does my share increase?
Your percentage share of the property will remain the same unless you ‘staircasing’ to purchase more shares of the property; however if the property value increases then the value of your share will proportionally increase.