What is Shared Ownership?
Shared ownership is a government-backed scheme designed to help first-time homebuyers and those who don’t currently own a home get onto the property ladder. It provides an affordable way for individuals to own a share of a property, while paying rent on the remaining portion. But how does this scheme work? Who can apply for it? In this blog post, we delve into the intricacies of shared ownership, exploring its benefits and eligibility criteria.
Understanding the Mechanics of Shared Ownership
Under the shared ownership scheme, you buy a share of your home — typically between 10% and 75% — and pay rent on the rest, which is owned by the housing association. The rent you pay is usually lower than the rate charged on the open market and is recalculated every year.
A key advantage of shared ownership is that it requires a smaller deposit than buying a home outright. Your mortgage and rent can often be less than if you bought the property entirely yourself or rented it privately. Over time, you can buy more shares in your home, a process known as staircasing, until you own the property outright.
Eligibility Criteria for Shared Ownership
To qualify for shared ownership, you must meet specific criteria:
- You’re a first-time buyer, or you used to own a home but can’t afford to buy one now.
- Your household earns £80,000 a year or less (£90,000 a year or less in London).
- You rent council or housing association property.
- You’re an older person – there’s a specific Older People’s Shared Ownership (OPSO) scheme for those aged 55 and over.
Additionally, some housing associations might have their own eligibility criteria. Therefore, it’s vital to check with them before you apply.
Applying for Shared Ownership
If you’re eligible and interested in shared ownership, the application process begins by contacting the agent in the area where you want to live. They can guide you through the application and provide information about available properties.
Once your application is approved, you’ll need to secure a mortgage for the share you’re buying. Like any mortgage, you will need a deposit, usually at least 5-10% of the share’s value, not the whole property.
Staircasing: Increasing Your Share
As mentioned earlier, shared ownership allows you to buy more shares in your home when you can afford to, a process known as staircasing. The cost of your new share will depend on how much your home is worth when you want to buy the share. If property prices in your area have gone up, you’ll pay more than your first share. If they’ve fallen, you’ll pay less.
Shared ownership offers a unique opportunity for those struggling to buy a home outright. It’s an excellent option for those on lower incomes or with smaller deposits to get onto the property ladder. However, it is a big commitment, so it’s essential to consider all aspects, including the cost of potentially increasing your share, before deciding if it’s right for you.
Keep in mind, every individual’s circumstances are unique, and it’s always worth seeking independent financial advice before making any significant financial decisions. Shared ownership can be an effective route to homeownership, but it’s vital to understand the process fully, including its pros and cons. With the right knowledge and guidance, you can navigate the property market with confidence and secure your dream home.
If shared ownership sounds like the right move for you, contact your local agent or housing association for more information and available properties. It’s time to take your first step onto the property ladder!
