Shared Ownership
A mortgage scheme designed to assist buyers who cannot afford the entire deposit for a suitable home. It enables you to purchase a percentage of the home's value, allowing you to step onto the property ladder, while a housing association retains ownership of the remaining share.
What is shared ownership?
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Shared ownership allows you to own a percentage of a property, while a landlord, such as a housing association or local authority, owns the remaining share and rents it to you at a reduced rate.
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These properties are typically leasehold, meaning you purchase your portion for a specified period.
Shared ownership schemes can assist those who might otherwise struggle to buy a home, including individuals with lower incomes or those looking to purchase in high-cost areas.
How does Shared Ownership work?
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Using the Shared Ownership scheme, buyers can purchase a share of a property, usually between 25% and 75% of the purchase price, with some homes allowing shares starting at 10% via a mortgage. You'll then pay rent on the remaining share to a housing association. Over time, you can buy additional shares in the property.
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You can finance your share with a mortgage or your savings, while paying rent to the housing association for their portion. Although a deposit is necessary, it will be smaller, typically between 5% and 10% of the share you are buying, since you're only purchasing a part of the property.
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While not all lenders offer mortgages for Shared Ownership properties, and some may require a specialized Shared Ownership mortgage. Knightwood Mortgages can help you find the right lenders to approach.
For Example:
You buy a 50% share in a house worth £200,000, which is £100,000.
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If you put down a 5% deposit of £5,000 on that share of £100,000. You’ll then have a mortgage of £95,000.
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You’ll then rent the rest of the property from the landlord.
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You will have to afford both your mortgage and your rent payments.
Who can apply for Shared Ownership?
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A handful of individuals believe the Shared Ownership scheme is exclusively for first-time buyers, but that's not the case. It can benefit anyone who meets the following criteria:
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Can put down a deposit of 5-10%
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Does not already own another property
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Has a total household income of £80,000 or less (under £90,000 in London)
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Has a good credit history and can prove they can afford the costs (similar to buying any other house)
How to buy an additional share (staircasing) of the property?
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Once you are living in a Shared Ownership property, you have the option to buy a larger share, potentially up to 100% ownership, if the housing association allows it. This process is called 'staircasing'. The cost of purchasing additional shares will reflect the current market value of the property. If the value has increased, you'll pay more; if it has decreased, you'll pay less. The housing association will arrange a valuation and provide the cost for the new share. While staircasing is an excellent way to increase your property ownership, be aware that each purchase involves costs, such as valuation and legal fees.
How to sell a Shared Ownership property?
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If you decide to sell a Shared Ownership home, you must give the housing association the first opportunity to buy it. Start by notifying the housing association. Next, select a surveyor to value your home, typically from a list provided by the housing association, and pay the valuation fee. The housing association will then market the property to find another eligible Shared Ownership buyer, charging you a selling fee. They have about eight weeks to sell your home. If they don't find a buyer within this period, you can usually sell it on the open market through an estate agent, but only to someone who qualifies for Shared Ownership.
How can Knightwood Mortgages help?
At Knightwood Mortgages, we're dedicated to making your shared ownership application process as easy as possible. Contact us to find a suitable mortgage deal by emailing
services@knightwoodmortgages.co.uk or calling 03301 336045.
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