It was conceived in the 1970s and designed to help key workers, the military and low-income households, but in the face of catapulting house prices over 20 years its take-up has ballooned with more young professionals and families tapping into the scheme.
Shared ownership allows the purchase of between 25 and 75 per cent of a property for a deposit of five to 10 per cent of that share, with rent paid on the remainder to the housing trust.
It is designed to help those with a steady income but a relatively small cash deposit.
That all sounds sensible right? It has, however, been overshadowed by the Government’s Help to Buy shared equity scheme and its purported complexity can be off-putting.
Here’s how it really works.
Are you eligible?
Eligibility varies and is based on an assessment of need. For some schemes, in Croydon for example, local residents get priority.
Households with an income of under £90,000 should only apply.
Are there hidden costs?
Monthly costs will consist of a mortgage, on the percentage share you own; rent, on the share you don’t own; and usually a service charge.
The amount you will pay towards your mortgage will be dependent on the value of the share you purchase, the deposit you put down, the remaining length of your mortgage term and the interest rate.
“Rent is usually set at around three per cent of the unsold part of the property, however this does vary, so always make sure you have the exact figures when you enquire,” advises Jade Turnstill of Share to Buy.
Service charges will also vary. “You will have to undergo a financial assessment a well, designed to make sure your income will cover your monthly outgoings and will tell you exactly what you can afford,” she explains.
Check out the Share to Buy Mortgage Calculator before embarking on the process.
What is staircasing?
Shared ownership homes will launch at Regency Heights, Acton soon, with prices to be confirmed
Staircasing is the process of purchasing greater shares of the property up to 100 per cent.
There are, however, limits on how quickly you can do this, which vary from scheme to scheme. Staircasing can also be affected by house price fluctuation.
If the value of your home increases you will need to pay more for the new share. But, in the long run, it means you will be rent free.
Can I sell my shared ownership home?
If house prices have gone up since you bought your shared ownership home you may be in a position to sell and move into the mainstream market.
However, there are restrictions on the sale of the property to ensure it remains available to people in need of affordable housing.
The procedure will be set out in your lease and will include requirements such as notifying your housing association (HA) that you wish to sell and getting a new valuation on the property. The HA will sell it on your behalf to a buyer of its choice.
How will Covid impact shared ownership?
In his emergency summer budget, and in order to increase home sales, the Chancellor announced a stamp duty holiday on all homes worth up to £500,000. This means that the majority of shared ownership buyers will not pay any stamp duty. The holiday ends in March 2021.
Craig Hall, of the Legal & General Mortgage Club, attributes a direct rise in the uptake of shared ownership to the pandemic. Swamped with demand, many of the major high street lenders have withdrawn high loan-to-value products designed for first-time buyers, he explains.
As people face financial uncertainty and potentially a stifling of wage growth, shared ownership may become even more important in a post-pandemic housing market.
Our shared ownership home in Ealing, west London
Terry Harvey and Diego Negherborn bought their two-bedroom apartment in Ealing with shared ownership
Terry Harvey had been renting in Ealing for 18 years. He loves the swathes of green space and the varied nightlife. It’s his home and he and his partner Diego Negherbon were loathed to leave.
But the average deposit in Ealing is £60,000 and the couple were desperate to get on the ladder. So they turned to shared ownership in order to buy their first property together in their home borough.
Terry and Diego, who work for Transport for London and Avanti West Coast Trains respectively, saved a £14,000 deposit and used it to buy a 25 per cent share in a two-bedroom apartment in So Resi Ealing.
So Resi Ealing is close to Ealing Broadway and each home comes with three years free membership to a car club, fitted blinds and balconies or communal gardens. There are a few apartments left.