What is Shared Ownership?
Shared Ownership is a scheme offered by housing associations in the UK, designed to help people become homeowners. It allows you to part-buy and part-rent your home. This scheme is particularly beneficial for first-time buyers who cannot afford to buy a home outright.
How Does Shared Ownership Work?
1. Initial Share Purchase
- You purchase a share of your home, usually between 25% and 75%, using a deposit and a mortgage.
- The remaining share is owned by a housing association, to which you pay rent.
2. Monthly Payments
- You make monthly mortgage repayments on the share you own.
- Additionally, you pay rent to the housing association on the share you don't own.
3. Staircasing
- Over time, you have the option to buy more shares in your property. This process is known as 'staircasing.'
- As you buy more shares, your mortgage payments increase, but your rent decreases proportionally.
4. Selling Your Share
- If you decide to move, you can sell your share at any time. The housing association has the right of first refusal to buy it back.
- If you own 100% of your home, you can sell it on the open market.
Eligibility Criteria
- You must be a first-time buyer, an existing shared owner, or someone who used to own a home but cannot afford one now.
- Your household income should be less than £80,000 a year (£90,000 in London).
- You should not be able to afford to buy a suitable home on the open market.
Advantages of Shared Ownership
- Lower upfront costs: You only need a deposit for the share you're buying, which is usually smaller than the deposit required for buying a home outright.
- Easier entry into the property market: Shared Ownership makes homeownership more accessible, especially for those struggling to buy a home independently.
- Opportunity to increase ownership: You have the flexibility to buy more shares in your property when you can afford to, eventually leading to full ownership.
Considerations
- Limited choice: Shared Ownership properties are usually offered on new developments by housing associations.
- Ongoing costs: In addition to mortgage payments, you must budget for rent, service charges, and maintenance costs.
- Potential restrictions: There may be limitations on making alterations to the property, subletting, or selling.
Conclusion
Shared Ownership can be an excellent way for first-time buyers to step onto the property ladder, offering affordability and flexibility. However, it's essential to consider all aspects and eligibility criteria before committing to the scheme.
For more detailed information and assistance, contact your local housing association or seek advice from a financial advisor specializing in Shared Ownership mortgages.