The shared ownership scheme makes buying a house financially accessible for millions of people. If your household income is less than £80,000, you can take advantage.
With 5% deposits, buying property doesn’t have to be a pipe dream...
Unless you already own property, the prospect of buying a house in the UK can feel daunting. Here to help you is the government’s shared ownership scheme. You simply contribute as much as you can afford to your property purchase, with the rest covered by your local housing association. If your household income is less than £80,000, you could benefit.
Are you eligible for shared ownership?
The shared ownership scheme is a UK-wide initiative to help new buyers onto the property ladder. It’s open to both first-time buyers and people who used to own property but can no longer afford to buy outright. That includes anyone in an existing shared ownership property.
To be eligible your household income cannot exceed £80,000 (£90,000 in London). You must also have no outstanding credit issues - such as unsatisfied defaults or county court judgments.
How does shared ownership work?
The shared ownership scheme is great for buyers who are struggling to get a mortgage for 75% of a property’s full value. With shared ownership, you purchase a share of your house - somewhere between 25% and 75%. You then pay subsidised rent to a housing association for the remaining share.
It means that each month you will make a mortgage repayment to your mortgage provider as well as a rental payment to your housing association. Doesn’t that mean your monthly overheads will skyrocket? It depends on your mortgage. But remember that the rent you pay to your housing association is subsidised. The combined monthly cost of mortgage and rent is usually less than you would pay on mortgage repayments if you purchased the property outright.
What about the deposit?
With shared ownership the deposit you pay is just 5%. That’s on the purchase share price rather than the full value of the property, which makes things even cheaper.
What type of property can you buy?
Eligible properties must be owned by a housing association and designated as a shared ownership property. It can either be brand new or an existing shared ownership property that the previous owner has left (or is about to leave). The rules on eligible property are slightly different in Scotland and Northern Ireland.
Buying a larger share of your property
Over time you may want to invest in owning a larger share of your property. (Remember, you can start out by buying just 25% of your house.) You can do this whenever you feel financially able.
The price you pay to your housing association depends on the size of the share you are buying from them and the value of your home at the time of purchase. This is called staircasing. Your housing association will get your property valued (you pay for the valuation) and let you know the cost of your new share.
What happens when you want to sell?
You may decide that you want to sell your home - either to free up money or to move elsewhere. If you own 100% of your home you are free to manage the sale yourself. However if your housing association still owns part of your property, they have first refusal. They also have the right to find a buyer for your home. Once the property is sold, you will receive a lump sum for your share.
Stamp duty relief is coming soon
Another thing to note if you want to make your property purchase financially efficient: from 22nd November 2018 first-time buyers paying £300,000 or less for a residential property in England will no longer pay stamp duty.
If you’re aged 55 or over...
If you’re aged 55 or over you can buy up to 75% of your home through the older people’s shared ownership (OPSO) scheme. Once you own 75% you won’t pay any rent on the remaining 25%.
Additional options for buyers with disabilities
The home ownership for people with a long-term disability (HOLD) scheme gives buyers the opportunity to live independently through shared ownership. The key difference from the main shared ownership scheme is that if none of your local shared ownership properties meet your requirements for independent living, you may be able to choose a property from the open market.
What if you are struggling with a 5% deposit?
Shared ownership enables you to buy a property with just a 5% deposit. If that’s still slightly out of reach for your financial circumstances, don’t give up. The Help to Buy ISA gives first-time buyers a rewarding way to save for a deposit - with the government adding £50 to your fund for every £200 you save.
>> Read more about the Help to Buy ISA
Another option if you are not yet able to afford a deposit is the Rent to Buy scheme. With this scheme your local housing association or a property developer offers homes to rent for around 20% less than the typical open market rent values, with the option to purchase shares in your rented home in the future through shared ownership.
How do you apply for shared ownership?
The shared ownership scheme eases the financial burden of buying property for millions of people. Here at Belvoir estate agents Peterborough we have years of experience of helping buyers who have utilised affordable home ownership schemes. We can do the same for you. If you live in Peterborough and would like to discuss your options, please feel free to contact me directly. Don’t worry, there’s no charge for an informal chat.
This blog is written by Lottie, Lottie Hostead is Belvoir Estate Agency Peterborough’s Property Sales Manager. Born and raised here she is both a property expert with 10 years experience selling homes in Peterborough and a genuine local. If you’re thinking of selling your home here then give her a call for a free no-obligation valuation.