Tuesday, 17 May 2022

How to buy home with shared ownership

AS prices continue to rise, buying part of a home through the shared ownership scheme may be a good way for some to get on the property ladder.

Also known as part-rent, part-buy, it is one of several government initiatives in England intended to help people become homeowners.

By using it, a buyer initially owns a share of their home, typically 25, 50 or 75 per cent, with the option to purchase some or all of the remaining share in the future. They need to make mortgage payments on the share they own and rent on the share they don’t own.

Kit Sproson of consumer website moneysavingexpert.com said: “Shared ownership has existed since the Eighties and currently there are more than 150,000 households in England living in shared ownership homes — that's around one per cent of all households.

“Changes to the scheme were introduced in April 2021 to make it more accessible, including reducing the minimum initial share available for purchase to 10 per cent.”

However, Mr Sproson said that there is a number of “need-to-knows” about this scheme. He added: “Firstly, it is not limited to first-time buyers — people who have previously owned a home may also apply — and the buyer’s income needs to be less than £80,000 per year (or £90,000 in London).

“The buyer needs to put down a deposit on the property, but only based on the value of the share they are buying. So, if you're buying a 50 per cent share of a property worth £300,000, then a 10 per cent minimum deposit would be equivalent to £15,000.”

He also warned that shared ownership mortgages tend to be more expensive than other mortgages.

It is nearly always new-build homes that are sold through the shared ownership scheme, and the buyer is responsible for all repairs on the property, no matter how big a share of it they own.

The properties are always sold on a leasehold basis, which means the buyer owns the property but not the land it is built on. This can mean there are extra costs incurred, such as service charges or ground rent.

Potential homebuyers need to register with the government’s “help to buy” website and pass through eligibility checks before beginning their search for a suitable property.

Most properties available through this scheme are owned by a housing association, local authority or property developer.

Property

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