If you are a first time buyer and looking to purchase a property, Shared Ownership is a scheme that will allow you to do so if you cannot afford to buy on the open market.
Shared Ownership gives first time buyers and those that do not currently own a home the opportunity to purchase a share in a new build or resales property. The purchaser pays for a mortgage on the share they own, and pays rent to a housing association on the remaining share. Because the purchaser only needs a mortgage for the share they are purchasing, the amount of money required for a deposit is a lot lower when compared to the amount that would be required when purchasing outright.
The purchaser has the option to increase his share during their ownership of the property via a process known as ‘staircasing’, and in most cases can staircase all the way to 100%, thereby owning the property outright. Shared ownership properties are always held under a Shared Ownership Lease. The property will remain leasehold following the staircasing to 100% if the property is a flat but will revert to freehold status is the property is a house. If you staircase to 100% you become an outright owner, and you will no longer need to pay rent.
Shared Ownership is essentially for people who would like to own their own home but cannot afford to buy on the open market.
- The rent is usually less than the rate charged on the open market and usually charged at 2.75% of the property value per annum,
- You can start with a little as 25% share in some cases,
- Your deposit can be 5% of the price of the share, not of the whole property.
Stamp duty land tax (SDLT or simply ‘stamp duty’) can generally be deferred until your share reaches 80%. The stamp duty land tax (SDLT) for shared ownership purchases differs compared to standard purchase and staircasing as you have 2 different options for paying. You can either pay the stamp duty on the full market value or on the share you are buying now. If you intend to effect staircasing to 100% in the near future then it may be advisable to pay the stamp duty land tax on the full value of the property now rather than in increments as your staircase. Please refer to HMRC website for full details and calculations in this regard
Shared Ownership properties can often be found in private developments as the provision of a certain number of Shared Ownership units will often be required as a part of the planning permission for a development,
Getting started with Shared Ownership is not as complicated as people might think. First of all you should check if you are eligible. Please note that in addition to the general eligibility rules, some Housing Associations and boroughs have their own terms regarding priorities and affordability. These will be made clear on each property listing.
Search for suitable shared ownership properties, show your interest for properties and contact the appropriate Housing Associations for viewings. When you have chosen a property, you will have to make sure you have the required deposit and get a mortgage.
If you have a query about shared ownership or would like to arrange an appointment please do not hesitate to get in touch with myself or another member of the Residential Property team on 01256 320555 or by email: email@example.com.