Shared ownership What is shared ownership?
Shared ownership is a way of part-owning, part-renting a property that is designed for people who would struggle to afford to buy a home outright. Here, we outline how it works.
Shared ownership properties are sold through housing associations. You buy a stake of between 25% and 75% of the property, using a deposit and a mortgage.
You then pay rent on the remaining share, which is owned by the local housing association. The rent you pay can be up to 3% of the association's share of the property's value.
For example, if you owned a 40% share of a £150,000 property - £60,000 - the housing association would only be able to charge rent on the £90,000 share that it owns. This would be a maximum of £2,700 over the year, or up to £225 a month.
Shared ownership properties are leasehold properties, meaning you will own the lease on them for a fixed period of time, typically 99 years. You also have to pay a service charge for the property, which is usually charged on a monthly basis.
For help getting a shared ownership mortgage or to discuss other options for getting onto the property ladder, you can call Which?'s impartial mortgage service, Which? Mortgage Advisers, on 0808 252 7987.
Who is eligible for shared ownership?
There are currently certain restrictions in place on who can buy a shared ownership property.
Under current rules you are only able to buy a shared ownership property if your combined household income is £60,000 or less. In London your household income can be up to £71,000 if you want to buy a one or two-bedroom property, or up to £85,000 for larger properties.
Local authorities can also impose their own conditions as well, for example that you have to already live or work in the local area.
From April 2016 these restrictions are being relaxed, and local authorities will no longer be able to choose their own criteria. Anyone with a household income of less than £80,000 outside London, and £90,000 inside London, will be able to buy a shared ownership home.
This type of shared ownership will be known as Help to Buy Shared Ownership.
In the past, certain groups, such as teachers and nurses, have been given priority. From April, only military personnel can be prioritised over other buyers.
It is possible to buy a greater share of your property at any time from the housing association - this is called 'staircasing'. The cost of increasing your share will depend on the market value of the property at the time.
To do this you will need to pay for the housing association to carry out a valuation of the property and make sure you have the cash or mortgage finance in place to pay for the extra share.
What happens if I want to sell a shared ownership property?
You can sell your shared ownership property at any time, but the housing association has the right to try to find a buyer before you put it on the open market. The amount of cash you and the housing association will get from the sale will depend on the market value of the property at the time.
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