Shared ownership is a government-backed scheme in the UK that allows individuals to buy a portion of a property (between 10% and 75%) and pay rent on the remaining share. This can be a more affordable option for those who may not be able to purchase a home outright, especially in high-cost areas. However, shared ownership comes with its own set of complexities, benefits, and potential drawbacks.
This guide will cover everything you need to know about shared ownership, from its history to the finer details of eligibility, staircasing, and the pros and cons.
1. A Brief History of Shared Ownership
Shared ownership schemes have been around in the UK since the late 1970s, introduced as part of a broader initiative to increase homeownership and provide affordable housing solutions. The concept was developed to help those who were "priced out" of the market but still aspired to own a home. Over the decades, the scheme has evolved, with significant expansions in the 1980s under Margaret Thatcher’s government and further developments in the 2000s and 2010s. Today, shared ownership is a key part of the UK government's affordable housing strategy, with numerous housing associations and developers offering properties under this scheme.
2. How Shared Ownership Works
Under the shared ownership scheme, buyers purchase a share of a property (typically between 10% and 75%) and pay rent on the remaining share, which is owned by a housing association. Over time, buyers can increase their share of the property through a process known as staircasing, which allows them to eventually own the property outright.
Initial Purchase: The buyer pays a mortgage on the share they own and rent on the remainder. The rent is typically set at a discounted rate.
Staircasing: Buyers can purchase additional shares of the property, usually in increments of 10% or more. The cost of additional shares is based on the current market value of the property, not the original purchase price.
Full Ownership: Once the buyer owns 100% of the property, they no longer pay rent, but they may be responsible for service charges and other costs.
3. Eligibility Criteria
To qualify for shared ownership, applicants must meet specific eligibility criteria:
Income: Generally, the combined household income must be below £80,000 per year (£90,000 in London).
First-Time Buyer Status: Applicants are usually first-time buyers, though some exceptions apply, such as those who have previously owned a home but cannot afford to buy again.
Local Connections: In some cases, there may be priority given to those who have a local connection to the area, such as living or working in the borough.
Creditworthiness: Applicants need to have a good credit history and be able to secure a mortgage for the share they wish to purchase.
Age: The applicant must be at least 18 years old.
4. The Process of Buying through Shared Ownership
1. Assess Your Eligibility: Before applying, ensure you meet the income and other criteria. Consider speaking to a financial advisor or mortgage broker experienced in shared ownership.
2. Find a Property: Shared ownership properties are typically offered by housing associations. These can be new builds or resales of existing shared ownership homes.
3. Apply and Get Approved: Submit your application to the housing association. If approved, you’ll need to arrange a mortgage for your share.
4. Purchase Your Share: Once your mortgage is approved, you’ll complete the purchase of your share, pay any necessary deposits, and sign the lease.
5. Move In: After the paperwork is complete, you can move into your new home, paying mortgage repayments on your share and rent on the remaining portion.
5. Staircasing: Increasing Your Ownership
Staircasing is the process by which shared ownership buyers can gradually purchase more shares in their property, eventually leading to full ownership.
Valuation: Before buying an additional share, the property must be valued by a RICS-certified surveyor to determine its current market value.
Costs: The cost of the additional share will be based on this market value, not the original purchase price.
Legal and Administrative Fees: There are costs associated with staircasing, including valuation fees, legal fees, and possibly stamp duty, depending on the size of the share being purchased.
The more shares you own, the less rent you pay. When you reach 100% ownership, you’ll no longer pay rent, although you may still have to pay service charges and maintenance fees.
6. The Pros of Shared Ownership
Lower Initial Costs: Shared ownership requires a smaller deposit and mortgage compared to buying a property outright.
Pathway to Full Ownership: The staircasing option allows you to increase your ownership stake over time as your financial situation improves.
Reduced Rent: Rent on the remaining share is often lower than market rates, making monthly payments more affordable.
New Builds: Many shared ownership properties are new builds, which come with the advantages of modern design, energy efficiency, and lower maintenance costs.
7. The Cons of Shared Ownership
Staircasing Costs: Increasing your ownership stake can be costly, especially as it’s based on the property’s current market value.
Selling Complications: When you want to sell a shared ownership property, you must first offer your share to the housing association, which can delay the sale process.
Service Charges: Even if you staircase to 100% ownership, you may still be liable for service charges, which can be substantial in some developments.
Restrictions: There may be restrictions on altering the property, subletting, or even having pets, depending on the terms of your lease.
Market Fluctuations: If property prices fall, you might end up paying more than the current market value when staircasing.
8. Who is Shared Ownership For?
Shared ownership can be an attractive option for:
First-Time Buyers: Especially in high-cost areas where full ownership may be out of reach.
Those with Limited Deposits: The smaller deposit requirement can make homeownership more accessible.
People with Modest Incomes: It’s designed for those whose household income is below £80,000 (£90,000 in London).
However, shared ownership might not be suitable for those who can afford to buy outright, or those looking for maximum flexibility in terms of selling or altering their property.
9. Conclusion: Is Shared Ownership Right for You?
Shared ownership is neither inherently good nor bad—it’s a tool that can help people get onto the property ladder who might otherwise struggle. However, it comes with specific responsibilities, costs, and potential drawbacks that must be carefully considered.
For some, shared ownership is a valuable stepping stone towards full homeownership, providing an affordable way to enter the property market. For others, the long-term costs, restrictions, and potential complications may outweigh the benefits.
When considering shared ownership, it’s crucial to look at your current financial situation, long-term goals, and the specifics of the property and lease. With careful planning and informed decision-making, shared ownership can be a viable route to homeownership for many people in the UK.
Comentarios