Following on from our article about the Help to Buy ISA, this week we’re taking a look at another government scheme that helps to put people on the housing ladder: Shared Ownership. In the news this week the government announced plans to extend their Help to Buy ISA but it seems that the amount of Shared Ownership properties being built has dwindled. The Shared Ownership scheme is still scheduled to run until 2021 and many people have benefitted from it. So, how does it work?
Essentially If you can’t afford to pay the whole mortgage on a home, then the Help to Buy: Shared Ownership scheme offers you the chance to buy a share of it instead – from 25% up to 75% of the value of the property – depending on what you can afford. A housing association owns the other share and you pay rent on it. Further down the line if your situation improves then you can buy a bigger share of the property and many people have ended up owning a whole house using the scheme.
The scheme does not apply to any property that someone might want to buy – just new build, designated ‘Shared Ownership’ properties or those which subsequently become available through resale from housing associations .
As with other government Help to Buy schemes there are specific criteria that people must fill in order to be eligible. These are as follows:
- If you live in London and your household earns £90,000 a year or less
- If you live anywhere except London and your household earns £80,000 a year or less
- You are a first-time buyer
- You used to own a home but can’t afford to buy one now
- You are an existing shared owner looking to move
You need to take out a mortgage to pay for your share of the home’s purchase price, or fund this through your savings. Shared Ownership properties are leasehold.
As the scheme only enables people to buy newly built homes or existing properties through resale programmes, the amount of homes available is limited. The only group that are given priority on buying Shared Ownership homes are military personnel. And some councils who run their own shared ownership schemes may also have their own priority groups based on local housing needs.
If you are slightly older and can’t get a mortgage because you are closer to retirement, then there is a scheme for those aged 55 or over known as “Older People’s Shared Ownership”. Using this scheme you may only purchase up to 75% of your home. Once you own 75% you will not be charged rent on the remaining quarter.
More than 50,000 shared ownership properties have been built since the scheme was promoted in 2010 and many people have found it an excellent way of getting onto the property ladder. As with many schemes, there are some pitfalls to look out for if you are considering Shared Ownership. If your circumstances improve and you decide to buy a larger portion of your property (a process known as ‘staircasing’) and the value of the property has increased then you will have to pay more for it. Also if you default on your rent, it is the housing association that holds the lease and you could find yourself homeless and losing your entire investment. So there is some risk, but for many it has been worth it.
Have you used the Help to Buy: Shared Ownership scheme? What have your experiences been like? We’d be interested to hear about it. Let us know in the comments section below.