Shared ownership (SO) has become an increasingly popular option for individuals looking to step onto the property ladder in the United Kingdom. It provides an affordable and accessible way for people to purchase a share of a property while paying rent on the remaining portion. In this article, we will explore the concept of shared ownership, its benefits, and the eligibility criteria involved.
Shared ownership, also known as part-buy or part-rent, allows buyers to purchase a share (typically between 25% to 75%) of a property from a housing association or a private developer. The remaining share is usually owned by the housing association or a registered provider, who charges rent on that portion. This arrangement helps individuals with limited financial means to get a foothold in the property market without having to save for a substantial deposit.
There are several advantages to shared ownership.
- Affordability: SO makes homeownership more affordable by reducing upfront costs. Buyers only need to finance a portion of the property’s value, resulting in a lower deposit and mortgage requirement.
- Flexibility: SO allows buyers to start with a smaller share and gradually increase their ownership through a “staircase.” This flexibility allows individuals to increase their equity in the property over time, potentially leading to full ownership.
- Security: SO properties are subject to regulations that provide tenants with certain rights and protections. This includes a formal tenancy agreement that outlines the arrangement’s terms and conditions, ensuring security and stability.
- Shared Costs: By sharing ownership, buyers also share some of the costs associated with the property. This includes maintenance and repairs, which can be more manageable than owning the entire property independently.
To be eligible for shared ownership, specific criteria must be met.
- Age: You must be 18 or older to be eligible for shared ownership.
- Income: There is typically a maximum income threshold to qualify for SO. This threshold varies depending on the location and property, as different regions have different affordability criteria.
- First-Time Buyers: SO is often prioritised for first-time buyers, although some exceptions may apply. This means individuals who have yet to own property previously or are in the process of selling their current home.
- Financial Stability: It is essential to have a good credit history, demonstrating your ability to manage financial commitments responsibly. Additionally, you should have savings (minimum of £5,000) to cover the costs of purchasing a home, such as legal fees, surveys, and mortgage deposits.
- Affordability: It is crucial that you can afford the monthly rent and mortgage repayments for the shared ownership property. This ensures you can comfortably manage your financial obligations and maintain your home.
- Local Authority Priority: Local authorities may have specific priority groups, such as critical workers or individuals with a connection to the area, who are given preference in shared ownership schemes.
Meeting these eligibility requirements will position you as a potential candidate for shared ownership, allowing you to take advantage of the benefits it offers regarding homeownership and affordability. It is advisable to consult with housing providers or developers who offer shared ownership schemes to explore specific criteria and available properties that align with your circumstances.
It’s worth noting that shared ownership properties are leasehold, and buyers will be required to pay service charges and ground rent, which contribute towards the maintenance and management of the building.
Shared ownership has opened doors for many people who would otherwise struggle to enter the property market. It provides a realistic and affordable route to homeownership, allowing individuals to build equity in a property over time. However, it’s crucial to carefully consider the terms, costs, and future plans before committing to a shared ownership arrangement. Seeking professional advice from mortgage brokers and housing associations can help potential buyers make informed decisions and successfully navigate the shared ownership process.