What is Shared Ownership
Quite simply, Shared Ownership means that you own a share of a property whilst you pay a reduced rent on the remaining percentage. It means that instead of paying all your rent to a landlord, you get to enjoy a slice of the action. Once you have bought a fraction of your new home, you can then grow your share as your finances allow you to.
In many areas of the country, with Shared Ownership the combined cost of a mortgage and reduced rent will be less than if you were privately renting. This means that owning part of your home could work out cheaper than paying full rent.
When purchasing a property using Shared Ownership, shares are available between 25% to 75%, and buyers will pay between a 5% to 10% deposit on the portion of the share that they are purchasing. With large deposit amounts typically proving to be one of the major barriers to homeownership, Shared Ownership requires a lower deposit amount – taking you one step closer to full ownership.
For example, if you decide to purchase a 50% share of a property worth £150,000, you will need to pay a deposit based on £75,000. This means that a 5% deposit would be just £3,750 – a far more realistic amount than normally required.
In addition to a more attractive deposit amount, as you are only applying for a mortgage for your share of the property, those with a lower household income will be eligible. Using the above example, you will only be required to obtain a mortgage for the remaining £70,000 (after your 5% deposit is deducted), opening the doors to homeownership for first time buyers who may be buying on their own, or who have a lower income.
With the remaining share that you do not own, you will pay a reduced monthly rental cost. Continuing with the above example, you will be required to pay rent on £75,000 (the remaining 50%).
Sandy Macmillan, MD of Property Booking says: “Shared Ownership has always been a popular way of buying a new home. As we see homebuyers continue to struggle with affordability issues, as well as mortgage lending tightening, the scheme has really soared and is now helping thousands more homebuyers every year. Shared Ownership appeals to aspirational homebuyers due to the fact that it allows them to take smaller steps on to the housing ladder. Smaller and more manageable steps mean that buyers don’t take on too much when it comes to paying a mortgage and they can make sure they are in control of their house purchase. The real bonus of course is that anyone using Shared Ownership can eventually end up owning 100% of their property through a process called staircasing.”
What is staircasing?
Staircasing means that you can buy more shares of your home over time. While climbing the housing ladder, staircasing allows you to move at a pace that suits you, your finances and your lifestyle. Some buyers look to increase their share in their home as quickly as possible, while for others, owning a smaller share for the duration is equally desirable.
Currently, you are able to staircase in instalments that are multiples of 5%, although the Housing Secretary recently announced wider reform plans for Shared Ownership which include allowing homeowners to staircase in 1% chunks.
In order to staircase, you will need to get your home revalued. If your home is revalued at the time to be £200,000 and you decide to buy another 25% share (bringing your total ownership to 75%), this will add £50,000 to your mortgage.
The decision is yours as to whether you would like to add to your current mortgage at the existing rate or apply for a new mortgage with your remaining and updated shares. You may wish to change your rate of payment, so we would always advise that you speak to your lender to discuss what your options may be.
As you staircase and build up your shares of your home, in turn you will pay less in rent. Rental costs will quickly diminish as you exceed in ownership, and if you choose to staircase to 100% ownership then you will not pay any rent at all.
Staircasing to full ownership may be your ambition overall as it means you own a 100% of your home. Shared Ownership is a great way to ease yourself and your finances into full homeownership – allowing you to invest in your future.
Following the Government's proposed plans for a new national model for shared ownership, which will make it easier for owners to buy more shares in their home, Shared Ownership will potentially become even more accessible.
Qammer Hussain, Head of property sales and marketing at Newlon Housing Trust commented “Shared Ownership remains the best route into home ownership for people who cannot afford to buy a property outright. Proposed changes to make the purchase of additional shares simpler and more financially viable will be welcomed by Housing Associations and first-time buyers with aspirations of owning 100% of their home.”
What kind of homes are available?
Shared Ownership homes encompass a variety of properties in locations across the length and breadth of Britain, from trendy new apartments in city centres to larger family homes in the countryside. While many Shared Ownership homes tend to be new builds, there are also many resale properties available for purchase; offering buyers ample choice when getting onto the housing ladder.
What’s more, as a housing association owns a portion of your home, they will be responsible for the upkeep of the area and any communal gardens or spaces your home comes with.
What do I need to be eligible?
The eligibility criteria for Shared Ownership is relatively straightforward, with buyers needing to meet just a few simple requirements.
Firstly, there is a cap on household income – buyers outside of London will need to earn below £80,000 outside of the capital, while if you live in London, your household income must be less than £90,000. These caps ensure that the scheme is accessible for those who truly need it.
You will also need to either: be a first time buyer; be a previous homeowner who does not currently own a property; or be an existing shared ownership home owner.
As with all mortgage agreements, you will need to be 18 or over in order to apply. You will also need to have a good, trustworthy credit history that shows you can pay back and keep up with the costs of running your home – this is also key to applying for your mortgage.
What is Property Booking?
Launched in 2017, Property Booking is the UK’s leading first time buyer property portal, offering thousands of properties across the country that are available for purchase using either Shared Ownership or Help to Buy. Aiming to make the homebuying process as easy as possible by presenting buyers with ample choice of quality homes across the country, Property Booking is designed to ease the property buying experience and help people find a home in an area of their choice.
Property Booking uses innovative technology to help speed up the process and offer a wider range of options. The website is unique with a wide offering of exciting properties, and presents simple step by step guidance which cuts through complicated buying language and ultimately leads to a more straightforward journey onto the property ladder.
How Property Booking does things differently?
Buying your first home can be a daunting process, and it can sometimes be difficult to know where to start. Property Booking advises that firstly, you choose an area where you would like to live. Consider your location and also whether there is any flexibility in your decision. Would you be willing to extend your commute to work in favour for a property with a garden, for example?
Once you have a good idea of your ideal home, it’s time to get in touch with the Property Booking team to register your interest and complete an eligibility check. This is a simple step designed to help us move you onto the next stage. You can then arrange to view the property and make sure it is the right option for you.
Then, you can select a solicitor to handle the legal side of buying a property, such as handling the finances and filing the paperwork.
With Shared Ownership, fees can vary so we filter through the rhetoric and the jargon and present your options in a clear and concise manner that makes it easy to decide what’s best for you.
Once you’ve found your preferred suppliers as well as having secured your mortgage, you can select and reserve your property. The final step is an exchange of contracts, after which you will become a homeowner! It really is that straightforward.
Where can Property Booking take you?
Choice is at the heart of what Property Booking has to offer, and each day we have new properties available to choose from. Our website is well sign-posted so whatever area you may be interested in we give you an overview of the location, what to expect and all the properties that can be found in that region.
With properties available from every major city, from Manchester to Bristol, London to Cambridge you are guaranteed to find a home to suit you.
To find out more about purchasing your first home using Shared Ownership, visit www.propertybooking.co.uk