What Is Shared Ownership? A Modern Buyer’s Guide

Shared ownership is a government-backed scheme that helps buyers with lower deposits to purchase a share of a property.

As part of this scheme, the buyer pays a mortgage on the share they own and then pays rent towards the rest that they don’t own.

It’s a house-buying scheme that works for many in order to get onto the property ladder and is ideal for first-time buyers.

Key Aspects of Shared Ownership

When it comes to shared ownership, there are some key aspects worth knowing before committing to this type of property buying option.

Ownership and rent

With shared ownership, you part-own and part-rent the property. You’ll pay a mortgage on your share and then the subsidized rent on the remainder.

Deposit

With shared ownership, you’ll typically only need a 5% deposit on the share you’re purchasing and not the full property value. So if you’re buying a £250,000 property and buying half of the property, then you’re only paying 5% of £125,000, which is £6,250.

Staircasing

You can buy more shares later, which is known as staircasing. This ultimately helps you to own 100% of the property eventually.

Eligibility 

Generally, households earning £80,000 or less outside of London, or £90,000 in London, are eligible for this shared ownership scheme.

How it Works: A Buyer’s Guide

For anyone looking to opt into this shared ownership opportunity, there are a few steps to follow.

1. Check eligibility

You must be a first-time buyer to get this property opportunity. Other than that, you could be a previous homeowner who cannot afford to buy now or an existing shared owner who is looking to move.

2. Find a property

You’ll then need to search for shared ownership properties listed on local housing associations or the Share to Buy website directly, which is handy to look at.

3. Financial assessment

You’ll want to do an assessment to ensure you can afford the monthly mortgage, rent, and service charges for the foreseeable future.

4. Instruct a solicitor

It’s best to conduct specialised legal advice with a solicitor who will be required for these types of leasehold properties.  

5. Exchange and completion

You’ll be required to exchange contracts and, at this point, pay a deposit within a set timeframe, usually within 28 days.

Costs to Consider

There are a number of other costs to consider when it comes to shared ownership. These costs include the following:

• Mortgage and rent - Monthly payments to the lender and to the landlord

• Service charge - Fees for maintaining the communal areas, and these can rise over time

• Staircasing fees - Costs are associated with buying more of the home.

It’s good to know that even if you own 100% of the property, all share ownership homes are leasehold. Newer schemes will allow you to start with as little as a 10% share or a 5% one under some new models. You may have some problems with subletting or keeping pets, which is important to factor in too.

In conclusion, there are many benefits to shared ownership, so it’s worth doing your research to understand if it’s the best fit for you as a modern buyer.