Shared Ownership and Shared Equity, What's the Difference?
Under Shared Ownership, you purchase a specific share of a property, usually between 25 and 75% using a traditional mortgage. Then in most cases a housing association will buy the remaining shares. The homebuyer then leases these shares for a monthly rental fee (part buy part rent) and gradually buys more and more shares (or "staircases") until they own 100% of the property.
With Shared Equity, you own 100% of the property from the start, as an equity loan from a housing developer makes up the price difference between your deposit & mortgage and the purchase price. You may get a mortgage that only covers 80% of the price of the home, but you will own the entire property. Find out more about Shared Equity here
A HELPING HAND TO GET ON THE LADDER
Buying your first home is a big step and in today's difficult economic climate many potential buyers find that getting a foot on the housing ladder very daunting. But there are schemes available which help to buy a property even if you don't think you can afford it.
Most potential buyers find financing the purchase of a home has probably never been so hard as it is today. The mortgage marketplace is completely different than it was a few years ago before the economic downturn. Despite all the publicity about cutbacks and slashed budgets there are a range of affordable housing schemes available. England, Scotland, Wales and Northern Ireland all have different inititatives in place.
Under the shared ownership scheme you buy a share of the home and pay rent on the remaining share. These government schemes cover certain newly built homes across England. It is provided through HomeBuy agents who will decide if you are eligible to buy a home this way. HomeBuy agents are housing associations that have been authorised to run schemes for anyone who has problems buying a home.
HOW TO FIND YOUR LOCAL HOMEBUY AGENT
You need to contact the HomeBuy agent in the area where you live. You will then need to fill out an application form. You can find your local HomeBuy agent by logging onto www.homebuy.co.uk or look at the list below.
London HomeBuy agents
Metropolitan Home Ownership is the agent for east, west and north London. www.mho.co.uk
L&Q Group is the agent for south east and south west London www.lqgroup.org.uk
South East HomeBuy agents
Catalyst Housing Group is the agent for Berkshire, Buckinghamshire, Oxfordshire, Milton Keynes and Surrey Catalyst Housing Group
Moat Housing Group is the agent for Kent and Sussex www.moat.co.uk
HomesinHants is the agent for Hampshire and the Isle of Wight. www.homesinhants.co.uk
East of England HomeBuy agents
Moat Housing Group is the HomeBuy agents for Essex.
Lea Valley Homes in the HomeBuy agent for Hertfordshire. Lea Valley Homes
Orbit is the HomeBuy agent for Bedfordshire, Cambridgeshire, Norfolk and Suffolk. www.orbithomebuyagents.co.uk
East Midlands HomeBuy agents
East Midlands Housing is the HomeBuy agent for Derbyshire, Leicestershire, Lincolnshire, Rutland, Northamptonshire and Nottinghamshire. www.emhomebuy.co.uk
North East HomeBuy agents
Isos Group is the HomeBuy agent for Northumberland and Tyne and Wear. www.isoshousing.co.uk
Time2Buy is the HomeBuy agent for County Durham and Tees Valley. www.time2buy.org.uk
North West HomeBuy agents
HomesHub is the HomeBuy agent for Cheshire and Merseyside. www.homeshub.co.uk
Plumlife is the Homebuy agent for Greater Manchester and Lancashire. Plum Life
Riverside Home Ownership is the HomeBuy agent for Cumbria. www.riversidehomeownership.org.uk
South West HomeBuy agents
South West Homes is the agent for Avon, Cornwall, Devon, Dorset, Gloucestershire, Somerset and Wiltshire. www.southwesthomes.org.uk
West Midlands HomeBuy agents
Orbit is the HomeBuy agent for Birmingham, Coventry, Dudley, Hereford, Sandwell, Shropshire, Solihull, Staffordshire, Walsall, Warwickshire, Wolverhampton and Worcester. www.orbithomebuyagents.co.uk
Yorkshire and Humberside HomeBuy agents
My4walls is the HomeBuy agent for Humberside, north Yorkshire and west Yorkshire. www.my4walls.co.uk
Plumlife is the HomeBuy agent for south Yorkshire. Plum Life
You may also be able to get help through the shared ownership schems if you used to own a home, but can't afford to buy one now.
HomeBuy agents are housing associations that have been authorised to run various schemes.
The schemes they run are:
The term shared ownership means that you are buying a home in conjunction with a housing association. Joint applications are usually considered though.
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If you can't afford to buy a home on the open market you might want to consider shared ownership, which makes owning your own home a much more viable proposition. Through this scheme you buy a share of between 25 per cent and 75 per cent of the home's value. You will need a deposit and to raise a mortgage for whatever percentage of the homes value that you are buying. The housing association owns the remaining share of the value of your home and you will pay rent on this amount. The rent is up to three per cent of the share's value. The larger the share you buy, the less rent is payable. Usually, when you are able to afford to do so, you can buy additional shares in the property until you own the property outright, which is known as staircasing. You can increase your share in minimum tranches of 10 per cent until you own the property outright.
Properties bought through shared ownership are always leasehold. This means that you will own them for a fixed period of time, which is usually 99 years. When you buy the home you will become the owner of the lease. The housing association will then give you a lease for a fixed period of time and this will also set out your responsibilites and rights and those of the landlord.
As the leasholder you will be responsible for repairs inside the property and the housing association will take care of the outside. To cover any costs that might be necessary for outside work, you will need to pay a service charge, which will be charged on a monthly basis. It is a good idea to ask how much the service charge might be before you sign on the dotted line.
STAIRCASING - BUYING MORE SHARES
Once you have bought your first share most people want to buy more shares until you eventually own the entire value of the property. This is called staircasing. You can buy shares at any time once you have initially bought shares and are in effect the owner of the property. To do this you have to write to the housing association stating that you want to buy more shares. The cost of your new share will depend on how much your home is worth when you decide to buy more shares. So, if property prices have gone up then you will pay more for the new shares than you did for the initial shares. If property prices go down then the new shares will be cheaper. The housing association will then get the property valued and will let you know the cost of the new share. You will be responsible though for the valuer's fee.
As you are buying more shares more than likely you will need to increase your mortgage. You have three months to arrange the finances and complete buying the new shares. For more information you can look on your lease, which will have full details on how to buy more shares.
You can sell your shared ownership home at anytime even if you have not bought 100 per cent of the shares. You must tell your housing association in writing and if you own a share of your home, the housing association has the right to find a buyer for it. Naturally if you own 100 per cent of the property then you have the right to sell it yourself. However, when you put your home up for sale, the housing association has the right to buy the property back first. This is called 'right of first refusal'.
Shared ownership homes can be new or renovated apartments and houses. Housing associations will have details of second hand shared ownership properties available, which are called 'resales'. Obviously the prices for new or resales will vary from location to location.
For anyone aged 55 or over can get help from a scheme called 'Older Peoples' shared ownership. It works in the same way as the shared ownership scheme, but you can only buy up to 75 per cent of your home. As soon as you own 75 per cent of the home you will not have to pay rent on the remaining share.
SHARED OWNERSHIP FOR PEOPLE WITH DISABILITIES
If you have a long-term disability you can buy any home that is for sale on a shared ownership basis through the 'Home Ownership for People with Long Term Disabilities'. You can apply for this scheme if the homes in other HomeBuy schemes don't meet your needs.
Home loans for shared ownership properties have dramatically increased over the past year due to the return of big lenders to the marketplace and the appeal for shared ownership properties. Many lenders have re-surfaced after almost two years in the doldrums and this re-emergence has bought an additional 95 per cent LTV product to the market with a significant level of lending capacity available.
Through shared ownership instead of a deposit raised on the entire value of the home, buyers through shared ownership only need raise a deposit on the value of the share they are buying. So, lenders see shared ownership buyers as credible borrowers. Due to the stringent financial assessment of all buyers through housing associations, once they reach the point of applying for a mortgage they have been approved for the purchase of the new home.
EXAMPLE OF HOW THE FIGURES ADD UP
Cost of a new apartment - £250,000
Usual deposit of 25% - £62,500
Through shared ownership - Buying a 25 per cent share the potential
purchaser would only need raise £15,625