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Shared ownership home

Buying a Shared Ownership Home


Shared-ownership is a great way into home ownership and is the main affordable housing scheme. If you can't afford to buy outright, you can part buy/part rent your home.You might buy a 25%, 50% or 75% share in your home. You pay a rent for the share that you don't buy normally set at an 'affordable' rate of, say, 2.75%. The
bigger the share that you purchase, the less rent you have to pay. When you can afford to do so, you can buy more shares until you own your home outright in a
process known as 'staircasing'.

The other share in a shared ownership property is usually owned by a'housing association'. Alternatively, some shared ownership homes are provided by house builders directly on schemes called 'shared equity'. The Homes and Communities Agency refers to such schemes as 'Equity Loan' schemes because the Government provides a loan to buy part of the home. First Buy is the latest Government equity loan scheme, following on from Homebuy Direct.



Who can buy shared ownership housing?

Shared ownership housing schemes are usually intended for people who cannot afford to buy a suitable home in any other way. However, the way in which this is defined will vary considerably with some shared ownership schemes merely being restricted to first time buyers and others to applicants living within a certain borough. Generally, priority goes to the following groups in
the first instance, in order of priority: existing social tenants; serving military personnel; and then on equal priority ranking, local priorities as set by Local Authorities.


When a new housing scheme is developed that includes shared-ownership homes for sale, housing associations will usually advertise shared ownership properties for sale. If you are interested in shared ownership housing apply to the local authority or a housing association that offers shared ownership housing in your area as soon as possible.

You don't have to find a new housing development to be able to buy a shared ownership property. When shared owners want to move home, their property will either be offered to the housing association to find a buyer, or will be advertised in the local estate agents (i.e. as a second hand 'resale' property as described above).

Who does the repairs on shared ownership properties.

The shared ownership lease between you and the housing association will set out your rights and responsibilities as a shared owner. Although you have
not bought the property outright, you will generally have the normal rights and responsibilities of a full owner-occupier. In particular, you will generally be responsible for the cost of repair and maintenance to your home, paid through a monthly fee known as a 'service charge'.


Help to Buy

The Help to Buy scheme is made up of two parts:

  • an 'equity loan', (from 1 April 2013) where the government will lend you up to 20% of the value of your newly-built home
  • a 'mortgage guarantee', where the government will guarantee part of your mortgage if you only
    have a small deposit
     

The equity loan scheme - for newly built property

This scheme started on 1 April 2013 and will run for three years. It will be available in England only. The Welsh and Scottish governments and the Northern Ireland Assembly will have funding for similar schemes.

Under the loan scheme, if you have a 5% deposit and want to buy a newly-built home, you can apply for a loan worth up to 20% of the value of the property. So you will only need to take out a mortgage for 75% of the cost of the property. 


The loan is funded by the government and will be interest-free for the first five years. After that, you will pay a fee of 1.75%, which rises in line with inflation. You can repay it at any time - you can even wait until you sell the property before you pay it back.


Help to Buy replaces a previous scheme - FirstBuy


Help to Buy loans are available to movers as well as first-time buyers

  • you don't have to be on a low income to qualify
  • loans are available on properties worth up to £600,000


You can apply for the scheme via participating house builders or through a 'Home Buy agent'.


The mortgage guarantee scheme - for newly built and
existing property.This scheme will run from January 2014 for three years. It will be available throughout the UK.


The mortgage guarantee part of the Help to Buy scheme is designed to help you get a mortgage, if you only have a small deposit.


One of the problems experienced by people looking for a mortgage is that most mortgages - and the lowest interest rates - are only available to those people who need to borrow 75% or less of the value of their property. If you're looking to borrow 90% or 95% there are only a very few expensive deals around.

However, under the scheme, if you have a deposit of between 5% and 20%, mortgage lenders will be
able to buy a guarantee from the government that will compensate them if you default on your mortgage. So, in other words, with some of the risk removed, your mortgage company should be able to lend you the money to cover 90-95% of the purchase price of a property.

 

Some key advantages of the scheme:

  • the mortgage guarantee is available to movers as well as first-time buyers
  • it's available on both newly built and existing properties
  • you can get it on properties worth up to £600,000


NewBuy

The NewBuy scheme is designed to help you buy a
newly-built home by offering a mortgage of up to 95% of the property's value.

It's aimed at first-time buyers and those who already own a home but who only have a small deposit saved. It's only available in England.


What is 'First Steps'?

First Steps is the Mayor of London's brand to promote low cost home ownership throughout Greater London. First Steps London will have its own branding for London equity loan/shared equity and shared ownership/part buy
part rent in the capital.


What is 'shared equity'?

Shared equity is not the same thing as shared ownership. With shared equity, you generally use an 'equity loan' to form part of a deposit but the
person buying the home owns the whole property (though the provider of the equity loan usually has an agreement to share in any appreciation). From a customer's perspective, the main difference between the two schemes is that you are likely to need a larger deposit on shared equity as the shares typically
start from 75%, compared to as little as 25% on shared ownership. Also, the main providers of shared equity and other equity loan schemes tend to be major
housebuilders. The main shared equity schemes are both for new build homes and are First Buy and homebuy direct.