Your Brief Guide to Shared Ownership

If you're a first-time buyer or can't afford to be tied to a large mortgage, then you may consider buying a property through shared ownership.

This is a type of home ownership scheme to help those on a lower income get on the property ladder. Read on as we explain how it works.

What is Shared Ownership?

Shared ownership is a way of buying a home that meets your needs without having to afford the deposit and repayments of a full mortgage.

It works by allowing you to buy a share of a property, while the remaining share is owned by someone else. This means you only put down a deposit and pay a mortgage on your share, whilst the remaining share you will pay rent on.

For example, if you buy a 50% share for £125,000 (meaning the property is worth £250,000), then you will need to pay a 10% minimum deposit (sometimes you may be allowed to pay as little as 5%) which equates to £12,500, and pay back a mortgage on the remaining £112,500 that you’ll be borrowing from your chosen lender.



As for the remaining share, you will then need to pay rent on this in order to live in the property. The typical rate for this is 2.75% a year (although the property advertisement should state the specific rate at which rent will be charged); so, in this example you would pay 2.75% rent on the remaining £125,000 share, which would cost you £3,438 a year, or £286.50 a month. Remember - you will be paying this to the landlord of the remaining share as well as your mortgage repayments to your lender.

The Benefits

●     Ideal for helping first-time buyers get on the property ladder if they cannot afford to buy a freehold property.

●     The majority of homes sold through shared-ownership are new-build properties.

●     You can buy more shares in your property over time until you own it all.

●     You have the option to sell your shares at any time.

Increasing Your Share

When you first buy a shared ownership property, the initial share you can purchase is anywhere between 25-75% (although some housing associations allow a minimum share of 10%). However, if and when your financial situation changes, you can increase your share over time.

This can be by as little as 1% each year, although some associations set a minimum of either a 5% or even 10% minimum share increase.

When increasing your share, it’s important to remember that the price you will have to pay for this share is dependent on the property value at the time you look to increase it (bear in mind that the situation of the housing market at the time will also have an impact on this).

The more you increase your share, the more mortgage you will pay each month, however the less rent you will pay as the additional share will be reduced. You can keep increasing your share until you own 100% of the property, at which point it will either become freehold or leasehold (whereby you own the property but not the land it sits on), depending on what your housing association allows.

Get in Touch for Property Advice

Whether you’re a first-time buyer or a previous owner who’s struggling to get back onto the property ladder, we can offer you invaluable advice here at Andrew Lee Property Lawyers.

Get in touch with us today for expert guidance from our housing lawyers on how you can start your home ownership journey and turn your dream home into a reality.