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What is Shared Ownership?

Zenyx Griffiths

Written by

20th Apr 2021 (Last updated on 12th May 2021) 19 minute read

The Shared Ownership government housing scheme, also known as 'part-buy, part-rent’, allows prospective buyers to purchase a share of a home and then pay rent on the rest. It is a Help to Buy scheme that was created to help buyers with small deposits or lower incomes get onto the property ladder in the UK.

When participating in Shared Ownership, the buyer will be able to purchase a stake between 25-75% of the property from the housing association or private developer and then pay the remaining share through a discounted rent. You will typically be required to pay a minimum deposit of 5%, but this will be for your share of the home and not the overall property price. You will then be expected to pay for the rest of your share through a Shared Ownership mortgage. 

Compare My Move work with a number of property and finance experts to provide users with accurate and insightful information to help them through the process of buying a house. In this article, we will explain how Shared Ownership works, who is eligible for it and whether it’s right for you and your personal situation.

This article will cover the following:
  1. Who is Eligible for Shared Ownership?
  2. How Do You Apply for Shared Ownership?
  3. What Does 'Staircasing' Mean?
  4. How to Buy a Shared Ownership Property
  5. Shared Ownership Mortgages
  6. The Pros and Cons of Shared Ownership
  7. Is Shared Ownership Right for You?
  8. Other Shared Ownership Schemes
  9. Selling a Shared Ownership Property
  10. Alternatives to Shared Ownership
  11. Shared Ownership FAQs
  12. Learn More About Help to Buy

Who is Eligible for Shared Ownership?

Shared Ownership schemes are often used to help first-time buyers purchase a share in a new-build or resales property. However, first-time buyers are not the only ones who will be eligible for the scheme. They are also designed to help those in the UK who do not currently own a home or have a small deposit. 

Shared Ownership schemes are provided by private developers or housing associations - this means that the details of the sale may differ depending on the provider. Before choosing to apply for Shared Ownership, it would be wise to do separate research on the individual provider and scheme you’re interested in. If you decide to apply, don’t forget to read the small print on the lease. 

According to the UK Parliament, there are currently around 157,000 households living in Shared Ownership homes in England. Different schemes will require different criteria for you to be considered eligible. However, there are examples of general eligibility criteria that many Shared Ownership schemes use. To purchase a Shared Ownership home you must:

  • Be 18+ years old 
  • Have an annual household income lower than £80,000 if living outside of London
  • Have an annual household income lower than £90,000 if living in London
  • Have access to a deposit of 5-10%
  • Be a first-time buyer or currently do not own a property
  • Be in the process of selling your home if you do own a property
  • Be unable to afford a property suitable for your personal housing needs
  • Prove you are not in mortgage or rent arrears
  • Be able to show you have good credit and can afford the regular payments that come with buying a house
  • Have savings of at least £4,000 to cover the costs, however, this amount may vary depending on the provider

There are also separate Shared Ownership schemes for buyers over 55 years of age or for those who are unable to buy due to long-term disabilities. We will cover these types of schemes further in the article. 

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How Do You Apply for Shared Ownership?

To apply for Shared Ownership, you will first need to find a local Help to Buy agent, something you can easily do online. Once you find your local agent, their website should provide you with further details on how to apply for the scheme. 

You will typically be required to complete an application form to answer a variety of questions concerning your income, where you want to live and how much you currently have in savings. Once complete, it should take around 4 days for your application to be assessed. It’s important to note that it is possible to be denied so it’s vital you do your research before applying. 

If your application is accepted, you can begin searching for a suitable Shared Ownership property. Your Help to Buy agent can help you with this and should be able to show you local homes that are available. There is also the option of using the Property Booking and Share to Buy portals should you want a larger number of Shared Ownership and Help to Buy properties to view.

Through Shared Ownership, you could purchase a new-build home or even an existing property that is within a resale programme managed by the providers. You will be limited by what properties you can purchase and where, but your agent should be able to help add to your choices until you find the perfect property for you. You can then begin the buying process.

Once the transaction is complete and the house is yours, you will eventually be faced with the opportunity of buying additional shares through something called ‘staircasing’. 

What Does 'Staircasing' Mean?

When living in a Shared Ownership home, you will be faced with the possibility of buying additional shares through a process called ‘staircasing’. This process may even allow you to own 100% of the home in time. The cost of increasing your share will depend on the market value of the home at the time of inquiring. 

You can begin the process of staircasing your shares any time after you’ve purchased the home. However, some contracts may include a waiting period, stating the buyer cannot purchase additional shares until 2-years after the sale. How many times you will be allowed to staircase will depend on the provider.

To purchase additional shares, you will have to pay for the registered provider to arrange a valuation of the home whilst also ensuring you have the added money or mortgage finance in place to purchase the share. In April 2021, there were a number of important changes made to the scheme, including decreasing the minimum a buyer can staircase from increments of 10% to 1%. This has allowed the process of staircasing to be more flexible and suitable to those with smaller budgets. 

Stamp Duty on Shared Ownership Homes

When buying a Shared Ownership home, you will have the option of paying stamp duty either on the full market value of the property or on the initial share you’re purchasing. How you choose to pay this fee is entirely up to you and your financial situation. 

If you choose to pay stamp duty for the initial share only, then when you eventually increase your shares, the rate of stamp duty may change. If the value of the property increases, then so will your stamp duty bill. This is why it’s usually recommended to pay the fee upfront if the home is currently under the threshold as it could save you money in the long run.  

Due to the spread of COVID-19 and the resulting lockdowns, stamp duty has been scrapped on all homes in England under £500,000 with immediate effect until the 30th June 2021. After this date, the starting rate of stamp duty will be £250,000, which will last until the end of September 2021. In Scotland, stamp duty will be scrapped on all homes under £250,000 until 31st March 2021. In Wales, Land Transaction Tax will also be scrapped on homes priced under £250,000 until the end of June 2021.

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How to Buy a Shared Ownership Property

To purchase a Shared Ownership property, you should begin by registering with Share to Buy or contacting your local Help to Buy agent. This will help you find properties in an area you like that you know can be bought through the scheme. 

If you’re eligible for Shared Ownership, Share to Buy and your local agent will be able to find a number of suitable properties for you to consider. They can help you register your interest and organise a property viewing with the correct housing association. 

If you find a home you love, you will have to pay a reservation fee to begin the buying process. It is also recommended to ensure you have the required deposit ready and to chase up your mortgage application if it has not yet been accepted. The average price of the reservation fee is around £200 but this will vary depending on the housing association you are purchasing from. You will then be put through a full financial assessment that will be carried out by an independent financial adviser. 

During this assessment, you will likely be put through a credit check and asked to present:

  1. Proof of ID
  2. 3 months of payslips
  3. 3 months of bank statements 
  4. Proof of savings 
  5. Information concerning any existing debts or credit arrangements
  6. Information concerning any benefits you currently receive

Once the assessment is complete, you will be informed of what kind of share you can afford to begin the process. You will also be told how much rent you will then have to pay. If you are yet to arrange a mortgage, the financial adviser may offer to arrange one for you. However, you do not have to accept and can arrange a Shared Ownership mortgage yourself. 

When buying a Shared Ownership home or increasing your shares, you will also need to organise a valuation. It is recommended that you contact a RICS Certified Valuer to ensure a professional and reliable inspection.

Shared Ownership Mortgages

You will require a Shared Ownership mortgage for the proportion of the property you’re buying, but the type of such will greatly depend on your financial situation. You’ll typically require a 5% deposit for this and will need to arrange a valuation. 

Not all lenders will offer Shared Ownership mortgages, making it slightly more difficult compared to applying for a typical mortgage deal. Examples of lenders who may be willing include:

  • Barclays
  • Nationwide
  • Halifax
  • Kent Reliance
  • Leeds Building Society

It’s advised you speak to a mortgage broker before applying as they can help you find lenders willing to lend on these types of properties. It’s important to note that guarantor mortgages are usually not permitted for this type of transaction. 

The Pros and Cons of Shared Ownership

ProsCons

The scheme allows you to get onto the property ladder more quickly compared to buying a home outright.

You have to search for homes where there are Shared Ownership properties available, not necessarily where you want to live. 

It can sometimes be cheaper than renting.

It can be difficult obtaining a Shared Ownership mortgage. 

It’s accessible to those with a lower income as you’re only required to pay a 5% deposit.

It can be difficult to sell a Shared Ownership home.

You have the potential to own 100% of your property.

As with other leasehold properties, you’ll have to pay a service charge and ground rent.

The shares you own can be sold at any time. 

There will be restrictions on what you can do to the property.

You can choose how you pay your Stamp Duty (either as one payment or in stages).

You won’t own the property outright and will still be renting.

Shared Ownership often comes with a 10-year period for new Shared Owners, keeping your monthly costs down for this period of time. 

Staircasing can be difficult as, if the value of the property increases, the cost of the shares will also increase. 

You will have to arrange a valuation and pay for a solicitor each time you want to increase your share.     

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Is Shared Ownership Right for You?

Whilst there are a number of benefits to Shared Ownership, it’s not for everyone and, certainly, not everyone will be eligible. If you currently own a property (unless you’re an existing shared owner) or your household income is above the threshold of £80,000 a year (£90,000 in London), then Shared Ownership is not right for you. 

If you do match the eligibility criteria, then whether or not the scheme is right for you is entirely a personal decision. It can be a good way to get your foot onto the property ladder without requiring a large deposit and you can gradually increase the shares you have in the home. However, it’s vital to remember that you will not own the property outright, resulting in extra charges on top of the mortgage repayments. Before deciding to find a Shared Ownership home, it would be worth creating a realistic budget to help you get started. If you believe you can afford the mortgage repayments, discounted rent and other charges, then it may be a great way for you to start the slow process of owning your own home. 

As with any decision, it’s vital you do your research before deciding. There are disadvantages to take into consideration when looking into Shared Ownership and even extra fees that may dissuade you. For example, the property will be leasehold so you may encounter restrictions on what can be done or added to the home. There will also possibly be a cap or waiting period when staircasing, meaning owning 100% of the property could be a long process or perhaps impossible. It all depends on who you’re purchasing the home from what is stated in the lease.  

Other Shared Ownership Schemes

As well as being available to first-time buyers or those on a low income, Shared Ownership schemes are also available to the following groups:

  • Home Ownership for People with Long-Term Disabilities (HOLD)
  • Older People’s Shared Ownership (OPSO)

HOLD is a scheme designed to help people with a disability buy a Shared Ownership property. It is especially helpful for those who require special housing needs due to their disability. Through this scheme, homes on the open market can be bought on a Shared Ownership basis if properties from the housing association are not suitable.

OPSO, however, is a scheme for people aged over 55. It works the same as a typical Shared Ownership scheme except you can only buy up to 75% of your home. Once you own 75%, you will no longer have to pay rent to make up the remaining percentage.

To find out more about these specific types of Shared Ownership, you can visit the Help to Buy website where they provide a more detailed description.

Selling a Shared Ownership Property

Selling a shared ownership property can be more complicated than selling a property normally.

You’ll need to arrange for a surveyor to value your home. You will be provided with a list of surveyors from your housing association but it’s still important to compare surveying quotes and find the right professional for you. The housing association will then use the valuation to work out the value of your share. 

Terms and conditions vary, but the housing association that owns the other share of the property will normally have 8 weeks to find a buyer. If a buyer isn’t found during this period, you can sell the property through an estate agent in the normal way. Your estate agent will be required to complete a Shared Ownership form, however.

You will also be required to share your conveyancing solicitors details to begin the selling process. Again, don’t forget to compare conveyancing quotes to allow you to find a verified, experienced conveyancer who can help ensure a seamless sale. 

When signing the contract, you will also need the signature of anyone else who bought the property with you. If you are the sole owner, this won’t be necessary. You will also need to acquire an Energy Performance Certificate (EPC) before you can continue with the sale.

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Alternatives to Shared Ownership

Whilst Shared Ownership is a popular scheme for first-time buyers and those with a lower household income to get onto the property ladder, there are other options to consider to help you purchase a home. Below, we’ve listed a number of alternative government-backed schemes for potential buyers to research:

Help to Buy

Whilst Help to Buy: Shared Ownership is one option for buyers, there are also many other Help to Buy schemes to consider. From the popular Help to Buy ISA to the lesser-known   Armed Forces Help to Buy scheme, buyers across the UK have a variety of options to choose from. Whilst applications for the Help to Buy ISA are now closed, those who opened one before the deadline are still able to use them when purchasing their first home. 

It should be noted that some of the schemes will have different requirements depending on where in the UK you live. For example, Help to Buy in London will accept higher household incomes compared to the rest of the UK. 

Shared Equity 

One of the most popular Help to Buy schemes that could be an alternative is the Shared Equity Loan. Shared Ownership and Shared Equity are often confused with each other but they are, in fact, very different. There are also a variety of shared equity schemes to consider, not just the Help to Buy option so it’s worth doing the extra research before you decide.  

Whilst Shared Ownership allows you to purchase a share of a home and then pay rent on the rest, Shared Equity schemes allow buyers to use a deposit of at least 5% alongside a mortgage and equity loan. If you decide to use the Help to Buy Equity Loan, you can borrow 20% of the property price from the government (40% in London) which will be interest-free for the first 5 years. Despite having to pay back the loan, this means that the property will 100% belong to you, unlike in Shared Ownership. 

Right to Buy

Right to Buy is another government scheme to be aware of. It allows certain council tenants to buy their council home at a discount of up to £103,900 in London, and £77,900 across other areas of England. It is not available across the whole of the UK. However, the House Sales Scheme is somewhat of an alternative in Northern Ireland and there is also the Right to Acquire scheme to research. 

Lifetime ISA

Another option, especially for those who missed out on opening a Help to Buy ISA, is the Lifetime ISA. Launched in 2017, the Lifetime ISA is another government savings scheme that can help British residents either save up for their first home or for their pension later in life. Buyers will be able to save up to £4,000 every tax year with a 25% government bonus on top - the maximum for this bonus is £1,000 a year. You can use these funds to purchase a Shared Ownership or Right to Buy property if the purchase price doesn’t exceed the limit of £450,000.

To be eligible for a Lifetime ISA, you must be a UK resident aged between 18-39. Whilst one of the scheme’s aims is to help first-time buyers onto the property ladder, you do not have to be a first-time buyer to open a Lifetime ISA. 

Shared Ownership FAQs

1. What type of properties can you purchase through Shared Ownership?

Not all properties will be available for purchase through Shared Ownership. Most Shared Ownership homes are purpose-built by housing associations, meaning they will either be a new-build or a resale of an older property. All Shared Ownership homes are leasehold.  /.;

2. Do you need to use a Shared Ownership solicitor?

Depending on who you purchase the property from, the housing association will likely recommend a property solicitor or conveyancer from their personal panel. However, you do not have to accept. You can compare conveyancing quotes yourself to find the right professional for you. Although, it’s important the solicitor you choose has the necessary knowledge and experience in dealing with Shared Ownership properties. 

3. How long does buying a Shared Ownership home take?

The process of buying a new-build home will vary depending on a variety of factors, such as the speed of the conveyancing process and the length of time required to obtain a mortgage. However, it can take anywhere from 28 days to 2 months to complete the transaction, unless the property is still under construction. 

4. Will you be sharing the property with another person?

No, you will not be sharing the property with another person. You are welcome to buy with another person if you wish, but purchasing through Shared Ownership does not mean buying the property with another person. 

5. Is the property leasehold?

All Shared Ownership homes are sold as leasehold properties. You will receive a lease that will typically last up to 99 years and the housing association will act as your landlord. 

6. Is there a restriction on the number of bedrooms the property can have?

No. Shared Ownership buyers used to be limited to 1 extra bedroom than the household size required, but that is no longer an issue. You are now able to buy whatever you can afford and apply for properties with however many bedrooms you’d prefer. 

7. Who is responsible for the repairs of a Shared Ownership home?

This will depend on a number of factors, such as whether you’re purchasing a house or flat and whether the repairs are internal or structural. However, generally, you will be responsible for any repairs needed, unless the issues are within communal areas. Problems in communal areas should be repaired by the housing association, but you may be expected to contribute to a service charge. 

8. Can you make alterations to the property?

You will be allowed to decorate the property as you see fit, but for larger alterations or renovations, you will require permission. You should check the terms of your lease before planning any work on the home. 

9. Can you sublet the property?

Most Shared Ownership schemes do not allow buyers to sublet the home - this will be specified in your lease. However, some housing associations do allow buyers to take on lodgers, but again, you will require permission. 

10. When will Shared Ownership end?

The latest government announcement stated that the new Shared Ownership model will run until 2026.  

Learn More About Help to Buy

This article has been part of our help to buy guide, we hope it's helped with your research. In our next article, we will explore the process of staircasing your shares when owning a Shared Ownership home. To find out more, read what is staircasing?

Zenyx Griffiths

Before Compare My Move, Zenyx once wrote lifestyle and entertainment articles for the online magazine, Society19 as well as news articles for Ffotogallery.