Shared ownership schemes are an affordable way for homebuyers to access the housing market. But how do they work?
Sections
Who's eligible?
You can buy a home through shared ownership if your household earns less than £60,000 a year, you're a first-time buyer or rent because you can't afford to buy a home or you rent a home from your local council or housing association.
Pros and cons of shared ownership schemes
The big selling point of these schemes is that because you are only buying a share of the property, the mortgage will be smaller and cheaper than if you bought outright with a mainstream mortgage. A mortgage at 75% loan-to-value (LTV) of the property is going to work out far cheaper than one at 95% LTV after all.
There are downsides to shared ownership schemes though. You have to share any increase in the value of the property with the housing association when you sell. And in some cases you can only sell your property to a buyer using a shared ownership deal themselves, making it far harder to shift the property.
There’s also the fact that buying with only a small equity stake in the property exposes you to the risk of negative equity (where the property is worth less than when it was purchased) should the value of the property fall.
Examples of shared ownership schemes
HomeBuy Shared Ownership
Homes which can be bought on a HomeBuy Shared Ownership basis are available through housing associations. You buy a share in the property of between 25% and 75% with the use of a normal mortgage. You then pay rent on the share of the mortgage owned by the housing association.
You can ‘staircase’, meaning you buy additional shares in the property over time. When you do this your rent is recalculated and reduced. If you choose to sell up to 21 years after you fully own the home, the housing association has first refusal to buy it.
Older People's Shared Ownership
If you're aged 55 or over, you could be eligible for the Older People's Shared Ownership scheme. It works the same way as HomeBuy, but once you own 75% of your home, you don't need to pay rent on the remaining 25%.
Home Ownership for people with Long-term Disabilities (HOLD)
HOLD is a scheme which helps people with long-term disabilities to get onto the housing ladder. The idea is that it may help disabled people to move closer to family or support networks.
You buy a minimum stake of 25% with the use of a mortgage, while the housing association owns the rest. Most homes available through HOLD are leasehold, meaning you’ll have to shell out for service charges such as repairs and improvements.
When you sell, your landlord will have the chance to buy it from you. If they decide not to, you can sell it on the open market. The proceeds are then split between you and the landlord based on the proportions you own.
To find out more about these schemes, find a HomeBuy agent in your area.
More on buying a property
What is a shared equity scheme?
The cheapest and most expensive places to buy property