Do you dream of owning your home but don’t earn enough to qualify for the mortgage you need? The 200,000 shared ownership properties around the UK are testimony to the fact that you are not alone.
What is shared ownership?
Shared ownership allows people who don’t earn enough to purchase a property outright to buy a proportion of their home, typically between 25% and 75%. The remainder of the property is owned by a housing association. You will buy your portion of the value of the house with a mortgage and pay a reduced rent to the housing association for the remaining share.
Most shared ownership homes are new builds or sold on by housing associations.
Is it cheaper than renting?
Every shared ownership property is sold leasehold, which means you will pay a service charge.
You will need to apply for a mortgage, so you’ll need a deposit and will incur mortgage fees, stamp duty (if applicable), survey fees and insurance. Although you will only own part of the property, you will have to pay all of the maintenance costs.
The cost of the mortgage and rental payments may be more expensive than renting and when it comes to selling the property you may incur additional costs. There may also be restrictions over who can buy the property from you.
Am I eligible?
Shared ownership is generally aimed at first time buyers but there are other specific schemes available for the over-55s (Older People’s Shared Ownership or OPSO) and disabled people (Home Ownership for People with long-term Disabilities or HOLD). Military personnel are given priority. The government’s website gov.uk has more details of the schemes available, which vary between England, Wales, Scotland and Northern Ireland.
You can apply to buy shared ownership property if your household earns less than £80,000 per annum (or £90,000 per annum in London). You must also be either a first time buyer, unable to afford to buy a home or an existing current shared owner.
Can I buy a bigger share?
You can increase your share of the property by ‘staircasing’, or buying a further share of your home. The cost is based on a formal valuation of your home at the time of share purchase, and can be higher or lower than the price of the original share, depending on the valuation survey.
Can I sell the house?
You can sell your home yourself if you own it fully but if you want to sell when it is still owned in part by the housing association, it has the right of first refusal or will find another buyer for you.
Will I lose money?
You should never commit to the purchase of new build property unless you expect to keep it for a few years. As with buying a house in full, there is always a risk that you may be in negative equity when it comes to selling.
Bear in mind that your new build shared ownership home is likely to depreciate in value in the short term, just as when you buy a new car; if the value of your house falls, you will lose money if you sell.
How do I buy a shared ownership home?
You will need to arrange a mortgage but be aware that not all mortgage lenders are willing to lend on a shared ownership and you may have to shop around.
The Help to Buy website will help you to find a scheme for your area and provide more information on OPSO and HOLD. If you live in London, visit the Homes for Londoners website. You can also speak to your local council or housing association, which will be able to tell you whether schemes are available in your area and assess your eligibility.
Always get a survey carried out by an Independent Chartered Surveyor when buying a new home.
Back to October 2018 NewsletterÂ
© www.PropertySurveying.co.uk
SH/LCB