Shared Ownership New Homes


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The Ultimate Shared Ownership FAQS (Yes, You Still Need A Deposit)

Are you thinking of buying a house under the shared ownership scheme? Thousands of individual buyers and families benefit from the scheme every year, but is it right for you? What are the advantages, are there any downsides, and what do you need to know? We have the answers.

What is shared ownership?

Let's start with the basics. When you buy a house on a shared ownership scheme, you partly buy it and partly rent it. Typically, you buy between 25 and 75 percent of the property and rent the remainder at a reduced rate. You then have the option of purchasing the remaining share (the part you start off renting) at a later date.

Who provides shared ownership schemes?

Shared ownership schemes are provided by private developers and housing associations.

What is “staircasing”?

This is the term used to describe buying an additional share in your property in the future. You are normally able to buy this additional share in increments. The cost of increasing your share will depend on how much the property is worth at the time.

What are the benefits of shared ownership?

What are the downsides of shared ownership?

Who is shared ownership best suited for?

Shared ownership is ideal for first-time buyers, particularly if you can't afford to purchase a property in your desired area. It is popular with a wide section of people but is especially popular with younger people at the early stages of a career or marriage.

What types of property can you buy?

The vast majority of homes available in shared ownership schemes are newly built properties. If you are in England, most shared ownership homes are leasehold so you will have a monthly service charge to pay. You may also have to make additional payments to contribute to maintenance works.

How does the rental part of the agreement work?

The rental element of your agreement will depend on the provider and where you are. In general, however, the rent will not be more than three percent of the provider’s share of the property.

For example, if you own 60 percent of a property worth £150,000, you own £90,000 and the provider owns £60,000. If the provider charges you three percent rent, you would pay £1,800 a year or £150 per month.

Are the rules the same across the UK?

The devolved governments in Scotland, Wales, and Northern Ireland run their own schemes. They are similar to the shared ownership scheme in England, but you should check the websites of the local organisations for more details:

Am I eligible for the shared ownership scheme?

Eligibility depends on where you are and your personal circumstances. In England, shared ownership is usually available if:

In many situations, you must also currently rent a housing association or council-owned property.

There are some other things you should know about eligibility:

What are the steps you should take to buy a home under the shared ownership scheme?

Start by speaking to the Housing Team in the local council where you want to buy. They will tell you if shared ownership is available for you. You will then have to find out if you can get a mortgage. Part of this process includes making sure you can afford the cost of the home. This includes costs associated with purchasing the property as well as the costs of owning it.

Do you need a deposit?

Yes, you will need at least five percent of the value of your share in the property. For example, if your share of a £150,000 house is £90,000, you will need a deposit of £4,500. Some lenders will require higher deposits.

What other costs will I have to pay when purchasing a house via shared ownership?

You may have to pay mortgage fees as well as solicitor's fees. Stamp duty is another cost you may have to pay, plus there will be costs associated with moving. This includes everything from the cost of removal companies to getting home insurance to buying furniture.

Do you have to pay stamp duty on the total purchase price?

Usually, you have the option of paying stamp duty on the total purchase price or paying stamp duty on your share of the property. In the latter option, you will have to pay stamp duty on your annual rent as well.

There are advantages and disadvantages of both options. Only paying stamp duty on the portion you purchase will lower the cost and, if the value is lower than £125,000, may mean you don’t have to pay stamp duty at all. On the other hand, paying stamp duty on the full purchase price can reduce your costs in the long-run if the value of the house goes up and you decide to purchase an additional share.

Making a decision

In general, you will face more restrictions when buying a home through shared ownership, but the cost savings are significant. In fact, shared ownership can mean the difference between owning your home or not. It is worthwhile exploring further if you think it might be right for you.