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Shared Ownership: The pros and cons explained

It’s estimated that as many as 202,000 households living in Shared Ownership properties in England, according to the latest English Housing Survey.

But like all property ownership schemes, Shared Ownership comes with many pros and cons and deciding if its right for you is key.

In this guide, we outline all the pros and cons of the Shared Ownership scheme and explain exactly how it works.

Get in touch with your local agent to find out about their Shared Ownership homes.

What is Shared Ownership?

Shared Ownership is a government scheme that allows buyers to purchase a part share in a property, while paying reduced market rent to a housing association on the other share.

The scheme helps buyers with smaller deposits and incomes to get a foot on the property ladder.

How does Shared Ownership work?

Although the details may seem complicated, Shared Ownership is actually pretty straightforward.

In essence, you're only buying a part share of a property and as such, you’ll only need a mortgage on the share you own – meaning you’ll borrow less and require less money as a deposit than if you were buying 100% of a property.

When you buy a Shared Ownership home, the minimum initial share you can purchase is 10% of the property’s full value. However, you can build on this at a later date, which we'll come on to later.

What makes you eligible for a Shared Ownership property?

To be eligible to buy a Shared Ownership home, you must:

  • Be at least 18 years old
  • Have an annual household income of no more than £80,000 if you live outside of London
  • Have an annual household income of no more than £90,000 if you live in London
  • Be a first-time buyer or a unable to afford a suitable property on the open market
  • Not be in rent or mortgage arrears
  • Be able to show a strong credit history, with no County Court Judgments (CCJs)
  • Be able to afford to pay your mortgage and rent on a Shared Ownership home
  • Have a deposit of at least 5% of the share you want to buy
  • Have enough savings to cover the other costs of buying a home

Each housing association may also have its own set of additional eligibility rules.

How to buy a Shared Ownership home

You can search for available Shared Ownership properties in the area you wish to buy by visiting:

  • Your local estate agent
  • Housing association websites
  • Property developer websites
  • Property portals like Rightmove, Zoopla, and OnTheMarket

Cost of shared ownership

What is the minimum income requirement for shared ownership?

This will depend on where you live in the UK. Your total household income must be less than £80,000, however this changes to £90,000 in London and £60,000 in Wales.

What is a Shared Ownership mortgage?

To buy a Shared Ownership property, you’ll need a specialist Shared Ownership mortgage on the share you wish to purchase.

Shared Ownership mortgages are usually available as:

  • A fixed rate mortgage, where your payments stay the same for a set time
  • A variable rate mortgage, where payments can go up or down depending on the Bank of England base rate

Not all lenders offer Shared Ownership mortgages, so you should speak to a broker who’ll be able to advise you.

When applying for a Shared Ownership mortgage, you’ll need to provide:

  • A deposit of at least 5% of the share you’re buying
  • Proof of your identity and current address
  • Details of your employment
  • Proof of your income
  • Proof of any benefits you receive

The lender will also undertake a credit check, so always check your credit score, and look to fix any errors that could affect your mortgage application.

How Shared Ownership rent is calculated

The rent on your Shared Ownership property, which is payable on the share you don’t own, is subject to a maximum cap of 3% of the share owned by the housing association.

Most housing associations charge 2.75%.

This means if you purchased 40% of a property worth £200,000, the housing association’s 60% share would be £120,000.

Based on an annual rent of 2.75%, you would pay £3,300 annually, or £275 per month.

Shared Ownership rents are reviewed by housing associations on an individual basis, but normally once a year.

The maximum your rent can rise by is the Retail Price Index (RPI) plus 0.5%.

Do you pay stamp duty with Shared Ownership?

You’ll have the choice on whether to pay stamp duty on the full value of a Shared Ownership property or only on the share you’re buying.

By paying stamp duty on 100% of the property’s value up front, you won’t have to pay any further tax if you later decide to buy more shares in your home.

If you decide to pay stamp duty only on the share you buy initially, you’ll have to pay more stamp duty if you purchase additional shares later.

Shared Ownership stamp duty for first-time buyers

If you’re a first-time buyer, you’ll pay no stamp duty on the first £300,000 of your Shared Ownership property’s total value or the initial share you buy, up to a maximum value of £500,000.

What does ‘staircasing’ mean in Shared Ownership?

Once you’ve purchased your initial share in you Shared Ownership home, you may later wish to buy an increased share, which is known as ‘staircasing’.

Staircasing shares are usually available in 5% increments, although this can vary depending on your housing association’s lease.

When staircasing, your housing association will value your property and the additional percentage share you buy will usually be based on the new valuation rather than the property’s value when you first bought it.

However, you may be able to purchase an additional share of 1% each year for 15 years if your housing association allows it.

This would be based on your property’s original value in line with the House Price Index (HPI).

Stamp duty when staircasing

If you only pay stamp duty on your initial share of your property, you may have to pay more later if you decide to staircase.

However, stamp duty is only due if you staircase to 80% ownership or more, with any further staircasing thereafter also subject to the tax.

So, if you staircase from 25% to 70%, for example, you won’t pay any further stamp duty unless you later staircase past 80% ownership.

Can I own the entire home?

In most cases, you can staircase your way to 100% ownership if you wish, meaning you’ll pay no more rent to your housing association.

However, in some areas you may only be able to staircase to 80%, so always check this with your housing association before buying.

Selling a Shared Ownership home

Although you can sell a Shared Ownership home at any point, it can only be purchased by another Shared Ownership buyer unless you own 100% of the property’s shares.

Your housing association also has first refusal on finding a buyer, which is known as a ‘nomination period’.

This gives the housing association four, eight, or 12 weeks to find a buyer for your home and the exact nomination period will be outlined in your lease.

If the nomination period expires without the housing association finding a buyer, you can sell your share on the open market, subject to:

  • You paying for a valuation from a Royal Institution of Chartered Surveyors (RIC) surveyor
  • Any buyer meeting the eligibility criteria for Shared Ownership

If you own 100% of your Shared Ownership home, you can sell it on the open market as you would any other home.

For more information, read our guide to selling a shared ownership property.

Is Shared Ownership right for me?

Shared Ownership can be a great way to get a foot on the property ladder and buy a home that suits your needs.

However, you’ll need to consider:

1. Additional charges

Because Shared Ownership properties are leasehold, you may have to pay a maintenance charge to your housing association, alongside your rent.

2. Leasehold restrictions

Depending on the terms of your housing association’s lease, you may need permission to carry out work at your property.

3. Expenses when staircasing

If you decide to buy extra shares in your Shared Ownership home, you’ll need to factor in other costs, including:

  • Your housing provider’s valuation fee
  • Solicitor or conveyancing fees
  • Possible additional stamp duty
  • Mortgage fees

What are the advantages of Shared Ownership?

  • You may be able to buy a property that you’d otherwise be unable to afford
  • You’ll need less money as a deposit than if you were buying on the open market
  • You can buy extra shares in your property to increase your ownership
  • You’ll benefit from any capital growth in your property over time

What are the disadvantages of Shared Ownership?

  • You’ll pay additional charges as Shared Ownership properties are leasehold
  • Many shared ownership properties, particularly in cities, are leasehold flats that come with high service charges
  • You may be restricted on alterations you can make to your property
  • Not all lenders offer Shared Ownership mortgages
  • Only certain properties in certain areas are available under the scheme

Frequently asked questions about Shared Ownership

Can landlords use Shared Ownership scheme?

Buyers are generally forbidden from subletting the property. That said, some housing associations may permit this under exceptional circumstances.

However, if you have a mortgage on the property and wish to rent it out, you will need to obtain consent from your mortgage lender. They may require you to switch to a Buy-to-Let mortgage during the rental period and switch back to a residential mortgage afterward to comply with the terms of your Mortgage Offer.

Can you make a profit on Shared Ownership?

Buying a Shared Ownership home can turn a profit. If the property value increases, the value of your share also increases. Equally, if the property value decreases, the value of your share will also be affected. The outcome is dependent on the housing market, similar to any other property sale.

Is Shared Ownership only for first-time buyers?

Share Ownership is open to anyone who meets the eligibility criteria. The scheme is designed to assist individuals at various stages of homeownership, including upsizers, and downsizers.

Further reading…

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