Shared ownership What is shared ownership?
If you can't afford to buy a property outright, shared ownership allows you to buy a share of a home and rent the rest. We explain 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.
- Not all lenders offer mortgages for shared ownership properties. For independent advice on how to get a shared ownership mortgage and the best deal for your personal circumstances, call Which? Mortgage Advisers on 0808 252 7987.
Shared ownership: am I eligible?
You can only 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, 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 add their own rules. 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 staircase, you'll 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.
Selling 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.
Shared ownership pros and cons
Shared ownership can be a great way of getting onto the property ladder, but it's not the ideal solution for everyone. Here are some of the pros and cons:
Advantages of shared ownership
- It can enable you to get onto the property ladder more quickly than you might if you wanted to buy a home outright
- You can buy additional shares as time goes on and you save more
- It may be cheaper than renting
- You can sell a shared ownership property at any time, and will benefit from any increase in value it's seen since you bought
Disadvantages of shared ownership
- You'll have to buy where the shared ownership properties are, which may not be your preferred location
- It can be difficult to staircase (build up the share you own) if the value of the property increases, as the shares will become pricier to buy
- You'll usually have to pay a service charge - although this is true with many leasehold properties, whether they're shared ownership or not
- It can be tricky to get a shared ownership mortgage - call Which? Mortgage Advisers for help with this (0808 252 7987)
Your home may be repossessed if you do not keep up repayments on your mortgage.
Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.