If you’re looking to buy a house but can’t afford the full purchase price, Shared Ownership could be an option for you. Shared Ownership allows you to buy a share of a property (typically between 25% and 75%) and pay rent on the remaining share. You can then choose to buy further shares in the property at a later date (known as ‘staircasing’), until you own the property outright.
The Shared Ownership scheme is open to both first-time buyers and existing home-owners, as long as you cannot afford to buy a suitable home on the open market. You’ll need to have a household income of less than £80,000 per year (or £90,000 in London) and be able to demonstrate that you can afford the mortgage payments and rent. A good example of this is to check out a website such as Sage Homes who list shared ownership properties in the South of England such as Harlow but also further afield throughout the UK, always specialising in shared ownership, Hertfordshire for example and more. See their website for more information.
If you’re interested in Shared Ownership, there are a few things you should bear in mind. Firstly, you’ll need to find a property that’s available through the scheme – not all properties are eligible. Secondly, you’ll need to apply for a mortgage on the share you’re looking to purchase, as well as a Shared Ownership mortgage if you’re taking out a loan for more than 50% of the property value. And finally, you should be aware that there are some costs associated with Shared Ownership, such as stamp duty, legal fees and valuation fees.
If Shared Ownership sounds like it could be the right option for you, then read on for our step-by-step guide to buying a house using the Shared Ownership scheme.
Step 1: Find a property
The first step is to find a property that’s available through Shared Ownership. You can do this by searching on websites like Rightmove or Zoopla, or by contacting a Shared Ownership agent in your area.
Step 2: Get a mortgage
Once you’ve found a property you’re interested in, you’ll need to get a mortgage. If you’re taking out a Shared Ownership mortgage, you’ll need to have a deposit of at least 5% of the share value. For example, if you’re looking to purchase a 50% share in a property worth £200,000, your deposit would need to be at least £10,000.
If you’re taking out a conventional mortgage, the minimum deposit is usually 10% of the property value. However, some lenders will require a larger deposit – typically 20%.
Step 3: Apply for Shared Ownership
If you’re taking out a Shared Ownership mortgage, you’ll need to apply for the Shared Ownership scheme. This can be done through your local authority or a housing association.
Step 4: Pay stamp duty
If you’re buying a property with a Shared Ownership mortgage, you’ll need to pay stamp duty on the share you’re purchasing. For example, if you’re buying a 50% share in a property worth £200,000, your stamp duty bill would be £1,500.
Step 5: Complete the purchase
Once you’ve been approved for Shared Ownership and have paid the stamp duty, you’ll be able to complete the purchase of your property. You’ll then need to pay rent on the remaining share of the property.
What is staircasing?
Staircasing, when related to the shared ownership scheme means to buy an additional share in the property that you own, until you own it outright. For example, if you purchased a 50% share of a £100,000 property through shared ownership and later wanted to own the property outright, you would ‘staircase’ by buying additional shares until your share percentage reached 100%.
There are a few things to consider before staircasing:
-The value of the property may have increased or decreased since you first bought it which will affect how much money you need to buy the next share. A qualified surveyor will need to value the property before you proceed.
-If the housing association agrees to sell you another share, they must give all other shared owners who live in the property the first option to buy that share.
-You may need to pay a ‘marketing fee’ to cover the cost of advertising the property for sale, although this is not always the case.
Shared ownership can be a great way to get onto the property ladder, especially if you cannot afford to buy a property outright. By following our step-by-step guide, you can make sure that you’re prepared for every stage of the process.
If you decide to staircase at a later date, you’ll need to pay an additional deposit and stamp duty on the new share. For example, if you’re buying a further 25% share in a property worth £200,000, your deposit would be £5,000 and your stamp duty bill would be £750.
We hope this guide has been helpful in explaining the Shared Ownership process. If you have any further questions, please don’t hesitate to contact us.