Get the lowdown on this part-own, part-rent scheme with our handy guide.
How it works
This government-led scheme allows people priced out of homeownership to purchase a share in a property, ranging from 25 to 75% of the full market price.
You take out a mortgage for the stake you own and pay discounted rent to a housing association on the rest, and the deposit is much smaller than when buying on the open market, as it’s only needed for the share you’re buying.
Your combined monthly mortgage repayments, rent and service charge work out cheaper than buying an equivalent property outright, or renting it privately.
Who is eligible?
Shared ownership is available to first-time buyers, people who’ve owned in the past and existing SO owners who are selling – often families wanting to upsize. You must be aged 18 or over, unable to otherwise afford a home that meets your needs, have a good credit history and show that you are solvent enough to cover the costs of buying and the regular monthly payments.
To secure a shared ownership home in London, your household income – single or combined – can’t exceed £90,000, and the threshold is £80,000 everywhere else.
You’ll normally need a deposit of 10% of the share you are buying – though some housing associations only ask for 5% – plus around £5,000 for conveyancing and other fees. At some developments, priority is given to people who already live or work in the borough.
Finding a shared ownership home
Shared ownership is available at specific new-build developments or on older resale properties being sold by current shared owners. Start your search on sharetobuy.com, which lists thousands of shared ownership homes across the country, and visit individual housing associations’ sites for detailed information.
Despite misconceptions to the contrary, shared ownership homes are built to the same high standard as other homes on the same development.
Andrew Peglau, assistant director of marketing at Peabody says: ‘We pride ourselves on building homes with the same care and attention, regardless of tenure, ensuring our customers enjoy a high quality home that meets their home-ownership aspirations.’
Applying to buy
The application process is actually pretty straightforward.
Once you’ve found a property you like, you can apply to the housing association or via Homes for Londoners or, outside London, through your local Homebuy Agent, and will be guided every step of the way.
You’ll be given a financial assessment to check your affordability and the size of the share you can buy, then you can formally apply for the property.
‘Quite simply, a financial advisor will carry out an assessment using the affordability calculator issued by the HCA (Homes and Communities Agency). This ensures that the rent, service charge and mortgage is no more that 45% of the potential owner’s net income,’ says Mark Docherty, sales and marketing director at Hyde New Homes.
‘A buyer’s situation, deposit and income will be evaluated by a specialist financial adviser to ensure the share they buy is affordable and the most they can afford to buy at that time,’ explains James Munson, head of marketing at Notting Hill Genesis.
‘Depending on the outcome, the initial share could be raised to 30, 50 or even 75 %.’
With resales homes, you’ll be required to buy a share the same size as the one being sold.
How to get a mortgage
According to Siobhan Holbrook, director at Mortgage Light, securing a shared ownership mortgage is very similar to securing a more traditional mortgage and involves the same financial checks.
‘We’ll need the same proof of income, spending, ID and address evidence, as well as proof of your deposit,’ she says.
‘We’ll then submit an application to your lender after discussing your options with you, to get you the best deal – one size definitely doesn’t fit all. Not all lenders offer shared ownership mortgages, however the majority of high street lenders are happy to do so. We’re finding that shared ownership buyers are currently getting the same competitive rates as people buying on the open market.’
The Rules
You won’t be allowed to sublet but your housing association may agree to you getting a lodger. And although you’re free to decorate, major alterations such as structural changes will have to be authorised, so check your lease before proceeding.
Shared owners are responsible for maintenance and repairs of their homes, while the housing provider looks after communal areas and grounds.
Buying more shares
Shared owners have the option to buy more shares, called staircasing with some eventually owning 100% of their home so they no longer pay any rent.
Extra shares are normally available in minimum tranches of 5 to 10% of the current market value, and you’ll have valuation, conveyancing and possible mortgage fees to pay every time.
Nick Lieb, head of operations at Share to Buy says: ‘A common misconception is that your home-buying journey ends with the initial share purchase. This is far from the case as you can purchase additional shares in your home through a process called staircasing.’
Selling your home
When the time comes to sell, contact the housing association and get your home valued to set the sale price and calculate how much your share is worth.
Unless you’ve staircased up to 100% ownership, under the terms of your lease the provider first has to try to find a buyer. If, after a fixed period – typically six to eight weeks – it hasn’t sold, you can market it through your chosen estate agent.
All change
The government recently announced a shake-up to shared ownership, making it easier to get a foot on the ladder. Under the revamped scheme, the minimum initial stake you can buy will be more than halved, dropping from 25% to 10%.
So, if you were to purchase 10% of an first-time buyer home in London with an average price of £463,536, a 10% deposit on this share would be £4,635 or just 1%.
People will also be able to buy more shares in their homes in 1% instalments with heavily reduced fees, and, for the first ten years of shared ownership, landlords will cover maintenance and repair costs.
These changes will be implemented on all new-build shared ownership homes delivered through the new Affordable Homes Programme, beginning in 2021.
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source https://metro.co.uk/2020/09/22/everything-you-need-to-know-about-the-shared-ownership-scheme-13304610/
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