There are a lot of obstacles when it comes to home ownership, especially for first time buyers. One major hurdle is getting the money together for a full deposit; but a new scheme was introduced last year under the Help to Buy initiative that let buyers purchase a percentage of a house, instead of the whole thing: it’s called shared house ownership. But how does it work?
The Principle: spend less, buy less
The general idea for the shared house ownership scheme is simple: buyers have to find, for example, 75% of a deposit for a house (this can vary between 25-75% home ownership for buyers). But they also only own that 75%, meaning there’s less upfront cost and less mortgage to pay. What about the person who owns the other 25%? Usually that will be a housing association – the body you’re buying the house from in the first place.
It’s not a total escape from renting
Let’s continue with the example above. While you’ll have to take out a mortgage on that 75% of the house you’re buying, you’ll have to pay rent on whatever percentage of the house you don’t own. All related fees – Stamp Duty, legal fees, and surveys – must be paid by the buyer. Shared ownership properties are usually leaseholds – so be prepared for yearly charges to maintain common areas, gardens and surrounding grounds.
You’re not stuck with your original stake – you can buy more
This is called ‘staircasing’. Not a particularly luxurious term, but what it means is you can purchase more of your house back from the housing association until you own it outright. The cost of this really depends on when you’re buying. So if house prices have gone up, you’re buying at an expensive time, if they’ve gone down, the price of shares will be cheaper.
Be warned though – every time you want to buy a greater stake of your house, the housing association will value the house and you’ll be charged at their valued rate. Of course, more home ownership means that you pay less in rent, and the mortgage will be incrementally more expensive – but not as much as renting!
Selling is simple – but comes with a catch
Selling a shared ownership property is a little different than selling a property you own yourself – the housing association that owns a stake in the property has the right to find a buyer, and it will be listed as a “Shared Ownership resale property”.
What if you own 100% of the property? You’re in charge of submitting it to estate agents and make it ‘sale ready’. However, there’s a little hitch potential buyers should be aware of: for 21 years from the date the home became 100% yours, the housing association has ‘first refusal’, otherwise known as the right to buy the property back off of you.
There’s nothing to be afraid of when it comes to buying a shared ownership property. At iSell, we’re ready to guide you through all parts of the buying process. Our team is on hand to answer any queries or worries you have about buying and selling property. Drop us a line and throw a few questions our way!