For millions of people across the country, getting on the housing ladder can feel like an impossible dream. House prices are too high, and many people feel that they are forking out too much on rent every month to even start to save for a deposit.
But there are options out there. One of the best ways to get that first foot on the housing ladder is through shared ownership. Here, you buy a percentage of your home, then pay rent on the rest (which means a smaller rent and a smaller mortgage). You live there, you decorate it, and you decide when to sell it. Usually, you can keep on buying shares until you own it 100%.
Despite helping thousands of people into home ownership over the last 40 years, the big problem for shared ownership is that many people simply don’t know about it, let alone understand how it works. Because of these challenges, housing associations (the not-for-profit social landlords you pay your shared ownership rent to) have joined a new campaign to raise awareness of shared ownership in a bold and fresh way, to help people understand what it is (and isn’t) so they can make the decision on whether it’s right for them.
Think shared ownership could be right for you? Here are some of the most common questions that we’ve been asked about shared ownership – and you can find out more at sharedownership.net.
Why should I consider shared ownership?
If buying on the open market feels impossible, and you’ve had enough of private renting, shared ownership is another avenue for buying your own home. Because you’re only buying a share of the property, the deposit is naturally a lot smaller. Meanwhile, shared ownership properties don’t have a lot of the same restrictions as private renting. You can decorate, buy more shares when you want, and sell when you want.
Who is shared ownership for? Just first-time buyers?
Shared ownership is popular with first-time buyers who are looking to get on the property ladder but can’t afford the deposit and mortgage needed to buy a property outright. But it’s not just for them. It’s an affordable homeownership option for lots of people, like newly-separated couples, or people in later life looking to downsize. So long as you meet a few criteria (like earning less than £80,000 or not already owning a home), then shared ownership could be right for you.
What are the costs?
First you’ll need a deposit, typically between 5% or 10% of the share you’re buying. This could be as little as £2,000. After you’ve put down a deposit (and paid any legal fees), you’ll be paying your mortgage, rent, and possibly a service charge each month. Your mortgage is worked out based on the size of the share you’ve bought, and your rent is paid to the housing association you bought your property from.
So, let’s say you decide to buy a 25% share of a £250,000 shared ownership property, and put down a deposit of 5% (£3,750). Your monthly payments might look something like this:
• Mortgage – £340
• Rent – £390
• Service charge – around £80, depending on the property
= Total: Approximately £810 per month
Does the mortgage work the same as buying on the open market?
Yes, pretty much. You’re buying a share of a property, and so pay a mortgage on the part you own. An independent mortgage advisor can help suggest which type of mortgage might be best for you, based on your situation.
How much of the property do I own?
That’s down to your financial circumstances. An independent mortgage advisor can help you decide what size share of the property is right for you. Usually, the smallest share you can buy is 25%. The largest starting share you can buy is 75%. Over time, you can usually staircase (buy more shares of the property) all the way up to 100%.
What am I responsible for?
You’re a homeowner, regardless of the percentage you own and the fact that you pay rent to the housing association. So, it’s up to you to keep the place in good condition and fix anything you’re not happy with. If you’ve got a house, you’re responsible for repairs and maintenance inside and outside and covering the costs. If you’re living in a flat, you only need to worry about the inside – but you’ll probably need to contribute a bit of service charge for the building and grounds.
How do I sell my home?
You own your share so it’s yours to sell whenever you want. You’ll essentially be selling your share to another shared ownership buyer, through the housing association. You’ll need to get its market value determined by an independent surveyor.
If you’ve staircased all the way to 100% and own it fully, you can often sell on the open market – but your housing association has right of first refusal.
It’s usually quicker and easier to sell to your housing association than selling it on the open market. It also means the housing association can carry on using your property to help other people become homeowners.
Can I renovate or decorate?
Within reason! You don’t need anyone’s permission to hang pictures, strip the hallway, or paint every room a different colour. But knocking down walls or any other structural changes will need the housing association’s say. Of course, any improvements you make to the property will be taken into account when you want to sell – it could increase its value.
What is a leaseholder?
Shared ownership properties are usually leasehold, meaning that shared owners are leaseholders. Your legal contract with the housing association is called a lease, and it makes you the homeowner. It states how long the lease is for, what you’ll be paying and what your responsibilities are.
Being a leaseholder is one of the main ways to own a home. Most leases are between 99 and 125 years. Shared ownership leases can be extended once you purchase 100% of the home, however some housing associations allow you to extend before this. Your lease will contain all the details and costs for this process.
The lease makes you the homeowner and so you are responsible for all the repairs and maintenance in your home.
Remember, the lease is a legal agreement. Make sure you read it all. A solicitor is best placed to advise you on the detail.
Ella Cheney, Shared Ownership Programme Manager, National Housing Federation