Owning a home is something we all dream of from a young age, but with ever increasing costs, it often seems very far away.
For those who can’t afford to buy a house, shared ownership schemes can be the solution. Here’s how they work.
What is shared ownership?
Under a shared ownership scheme, you have the ability to buy and own a percentage of the property’s value and pay rent on the remaining share.
This is helpful for those who do not have enough money to purchase a house outright and those who cannot get a mortgage to cover the cost of a property in full.
As the name suggests, you don't own the property outright. Rather, you share the ownership of the property with a housing association who owns the rest of the share.
Typically under shared ownership schemes, you can purchase between a quarter to three-quarters of a property and are able to buy a bigger share in the property at a later date.
What kind of property can I buy with a shared ownership?
The majority of properties available to buy with shared ownership are new builds, however some homes eligible are those put back on the market by housing associations.
In England, all shared ownership properties are currently only offered on a leasehold basis.
What is a leasehold?
A leasehold is a type of land or property tenure in which you buy the right tooccupy the land or live in a building only for a specific length of time.
However some leaseholds can be for 999 years which effectively gives the purchaser a title that is as good as a freeholder.
Who is eligible for shared ownership?
The criteria for who can apply for the shared ownership scheme differs depending on your country.
In England you can buy a home with help from the shared ownership scheme if your household earns £80,000 a year or less, with that threshold increasing to £90,000 a year or less in London.
Additionally according the government website, you will also need to match any of the following criteria apply:
- you’re a first-time buyer
- you used to own a home, but cannot afford to buy one now
- you’re an existing shared owner
- you rent a council or housing association property
While first time buyers with limited housing alternatives are also given priority for shared ownership in Scotland, other cases are also given top priority, such as:
- members of the armed forces
- veterans who have left the armed forces within the past two years
- widows, widowers and other partners of service personnel for up to two
- years after their partner was killed while serving
- public sector tenants
- families on low incomes
- disabled people
A statement on the Scottish government website states that “if you can afford to buy a house outright, you won't qualify for shared ownership housing.”
Similar to Scotland, in England, people who work in the military will be given priority over other applicants.
Meanwhile to buy a home under the Northern Ireland Co-Ownership scheme, you must be able to show:
- you don't have an alternative, unassisted route into home ownership
- you can afford to make the payments involved in buying a property
In Northern Ireland, there is a cap on the value of the property you can buy as a co-owner, of £165,000.
Additionally, in Northern Ireland, rather than owning between 25 - 75 per cent, you can own anywhere from 50 per cent up to 90 per cent of the property's price.
You can also increase your share at any time with increases of five per cent in a process known as 'buying out'.
Additional info on the NI Shared Ownership scheme can be found at co-ownership.org.
In Wales, in order to find out the process and criteria for buying a shared ownership home, you will need to contact your local authority.
Who is responsible for maintenance costs?
While you may not own the property outright, it is your responsibility to cover the same costs as a normal home owner, such as those for repairs and maintenance.
Other shared ownership schemes
In England there is another shared ownership scheme for the over 55s, which allows you to buy up to 75 per cent of a property.
Once you reach 75 per cent of the ownership, you will no longer be required to pay rent on the remaining amount.
Another shared ownership scheme in England exists for those with long-term disabilities who cannot find a home that is suitable for such needs. If you fit under this criteria, you will be eligible for the Home Ownership for People with long-term Disabilities (HOLD) scheme.
Mortgages for shared ownerships
While you don't own the property outright, you will still have to apply for a mortgage and be responsible for paying for your share.
Similar to when you apply for a mortgage on the full price of a property, you will also have to undergo rigorous affordability checks by the mortgage lender and you will also need to provide a deposit.
The majority of major banks will be able to help you with a mortgage for shared ownership, however not all banks will be able to do so.