A Guide To Shared Ownership

Shared ownership is nothing new but it is becoming more popular as house prices continue to grow out of the reach of even well paid individuals - especially in pockets of the UK and London and the South East of England.

The Government have fairly recently got involved in the process too and they now offer a scheme to help people buy their new home. But before we go into the detail, it’s worth understanding just how you share ownership of a property.

There are several ways by which more than one party might own an interest in a property (for example, as a leaseholder or the lender of money secured on the property - a mortgagee) but in law the two primary ways to own a freehold interest are as tenants in common or as joint tenants.

Joint tenants

As joint tenants (sometimes called ‘beneficial joint tenants’) you have equal rights to the whole property. The property automatically goes to the other owners if you die and you can’t pass on your ownership of the property in your will

Tenants in common

As tenants in common, you can own different shares of the property, the property doesn’t automatically go to the other owners if you die and you can pass on your share of the property in your will.

The Government’s Shared Ownership Scheme

Shared Ownership schemes usually involve an arrangement of tenants in common, meaning that the share of ownership can be specifically determined at the outset and the shared interest of each party can be sold or left in a will as part of one’s estate upon death.

The Shared Ownership Scheme introduced by the UK Government in England (Scotland and Wales have their own schemes) is called “Help to Buy Shared Ownership” was created to help both first time buyers and former homeowners to get back onto the housing ladder and is available to help to buy a newly built home or an existing one through resale programmes from housing associations.

The scheme works on the basis that rather than having to put together a deposit and mortgage to purchase the whole of the property, a buyer can now purchase part of the property with the other 25 - 75% of the home being owned by a third party under the terms of this scheme. The homeowner then pays the mortgage every month in the usual way and in addition, pays a rental payment for the remaining share not owned by them.

The scheme is open to buyers that do not currently own a home (or are existing shared-ownership’ homeowners looking to move, as long as their household income is £80,000 or less outside London (£90,000 inside London).

If you are over 55 ask us about the Older People’s Shared Ownership Scheme which offers a rent free option on the share of the home you don’t own (up to a maximum of 25% of the home).

Only members of the armed forces enjoy special priority rights when applying for Government-sponsored shared ownership schemes but local authorities may offer priority rights to other groups.

Mortgage Required are authorised Help to Buy Agents and can advise you on how to buy your next home using a Help to Buy scheme. For more information contact us on 01628 507477.

Why Shared Ownership is so Popular 

Whilst shared ownership has been around for a while now, it has started to become more and more popular here in the UK, and as house prices continue to rise, it is an option that lots of people are considering when purchasing a property. Shared Ownership schemes are available through housing associations and is popular with first time buyers unable to afford housing in their area. If you’re keen to purchase a property and you’re wondering whether shared ownership could work for you, below are some of the many reasons why shared ownership is so popular these days. 

Help you get on the property ladder 

Getting a foothold on the housing market can be really difficult nowadays and if you have a low income, you may struggle to get the mortgage you need for the price of the property you’re interested in. Shared ownership could help you get on the property ladder and you would need a much smaller mortgage when you opt for this ‘part rent, part buy’ option. Generally, the shares offered for properties are between 25% and 75% of the property value, and you can decide how much to purchase depending on your individual financial circumstances. 

Reduce the amount you need to save for a deposit 

Due to the fact that for shared ownership you would only be purchasing a percentage of a property, you need a much smaller deposit. Saving for a deposit can sometimes take years, especially if you have lots of other financial commitments, and often, the less you need to save, the quicker you’re able to purchase your own home. If you’re a first-time buyer, for example, you may only need to save a 5% deposit. This would only be 5% of the share you’re buying so it would significantly reduce the amount you need to save. 

Increase your share over time 

Even if you could only afford to purchase 25% of a property to start with, you have the option to buy more of the property in the future. This process is known as staircasing and, simply put, you could purchase more shares from the owner of the remainder of the property. Sometimes, you can even staircase all the way up to owning 100% of the property and this is a brilliant way to become the sole owner of your home. However, you would need to check for a staircasing cap, some shared ownership properties have these. 

The more of a property you own, the less you need to pay in rent for the remaining share that you don’t own and although your mortgage would likely increase, you may still save some money every month. If you eventually own 100% of the property, you may be able to get a more competitive mortgage too, potentially saving your money in the long run. 

Have equity to use for a future property purchase

Unlike when you rent, shared ownership provides you with the opportunity to have some equity in a property. With every mortgage payment you make, you own more and more of the property, and this equity is beneficial if you want to purchase a new property in the future. Over time, you should have enough equity for a deposit for your next property and you may find it much easier to purchase your dream home when you don’t need to worry about saving thousands of pounds in addition to paying rent for the property you’re currently living in. 

Finding out more about shared ownership

If you feel Shared Ownership is right for you, and you are looking for a mortgage advisor in Maidenhead to help you get a shared ownership mortgage, be sure to contact our team here at Mortgage Required. We offer a range of mortgage services and we can help you find a mortgage product that meets all of your requirements in line with your budget. Our experienced team can provide you with comprehensive mortgage advice and we offer a whole of market service to our customers, making us their first choice for all of their mortgage needs. To find out more about how our mortgage advisors in Maidenhead can help you, feel free to explore the rest of our website.