What is shared ownership?
Buying a home is likely to be the largest purchase you ever make, and one which many people struggle to afford. This is where shared ownership comes in, you can purchase 25-75% of the home’s value and pay rent on the remainder. If you can afford to purchase bigger shares of the home later down the line, this option is open to you.
Shared ownership is a type of Help to Buy that the government offers. You’d need to meet these criteria to be eligible:
- if you live outside London, your household would need to earn £80k per year or less. If you live in London, your household would need to earn £90k per year or less
- you’re an existing shared owner wanting to move, you’re a first time buyer, or you used to own a home but can’t afford to buy one now
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How does shared ownership work?
For some homes, you could start by owning just 25%, and you could pay as little as 5% deposit on this. The rent that you’d pay on the remainder is lower than the open market, often 2.75% of the property value per year. Stamp duty may be deferred until you own 80% of the home.
Nowadays, some new build developments must contain a proportion of shared ownership units, which can put affordable housing in prestigious postcodes.
If you’d like to enquire about shared ownership, find your local Help to Buy agent to check you are eligible and they will help you take it from there.
What are the pros and cons of shared ownership?
As with anything, there’s both positives and negatives to shared ownership. Here we outline a few in order to help you decide if it could be for you:
- you can get your feet on the property ladder as an owner-occupier
- higher availability of mortgages
- lower deposits
- smaller monthly payments than private renting or even a mortgage on the whole property
- you could build up your percentage ownership over time
- possible to sell your shares at any time
- no stamp duty until reaching a threshold of ownership
- higher security through than through renting; as long as you’re keeping up with payments you can live there for as long as you like
- limited mortgage options compared to buying outright
- no properties will be freehold, you’ll always start on leasehold, however once you own 100% you may have the option for freehold
- whatever the proportion of share you own, you still need to pay all of the ground rent and service charge on the property
- once you own 80% or over, you’ll need to pay stamp duty on the value of the whole property
- you may need permission from your housing provider before you make any structural changes, but you can freely decorate the inside
We hope this has helped you decide if shared ownership is the right decision for you, or at least given you more insight into how it works. If you still have questions, take a look at the government’s Help to Buy page.
I began writing for Property Press Online in October 2019. Particular areas of interest are housing market news and new developments in the market.