What are the costs of Shared Ownership?

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Beginning the process of buying a shared ownership home involves many important factors, with financial preparedness being the most critical. It’s essential to confirm you can afford the payments on the property before diving in. Explore our range of resources and advice, to understand the various costs included in the process.

Keep reading to find out more about shared ownership purchase costs, eligibility and shared ownership mortgages

Shared Ownership Deposit

What are the costs for purchasing a Shared Ownership home?

You may know the costs of a standard home, but a Shared Ownership property is a whole different kettle of fish. Find out what to expect when you buy a shared ownership home.


A small deposit

To buy a Shared Ownership home, you will first have to put down a deposit. The benefit of a Shared Ownership home is that this upfront cost will be a lot less than the deposit for a regular house on the market, usually varying from 5% to 10%.

Your mortgage


In case you are new to mortgages (lucky you by the way), they are a form of loan that you need to finance your property. This is then repaid in monthly instalments until your mortgage is paid off.

Like with buying most houses, you will have to pay a mortgage on a Shared Ownership home. The amount that you pay on your mortgage will vary depending on the value of the share you purchase, your deposit and the remaining length of your mortgage term.

 

Rent for the rest of the property


Alongside your deposit and mortgage payments, you also have to rent for the portion of the house you haven’t paid for. Rent on a Shared Ownership home is usually around 3% of the unsold portion of the property.

Shared Ownership Eligibility

Looking to buy a Shared Ownership home and wondering if you are eligible? The general eligibility criteria for Shared Ownership are as follows:

  • As with any house in the UK, you must be an adult – at least 18 years of age – to buy a Shared Ownership house.
  • Outside of London you have to be earning a salary less than £80,000.
  • In London, your annual household income must be less than £90,000.
  • Shared Ownership homes are geared towards first-time buyers, so having a hidden home is not a great idea.
  • If you do already own another property (either in the UK or abroad), you must be in the process of selling it.
  • If you can afford to buy a home on the open market, you can’t apply for Shared Ownership.
  • While Shared Ownership is aimed at home buyers who need extra help, you will have to show that you have a good credit history and can afford the regular payments and costs of a Shared Ownership home.

Shared Ownership Mortgages

What do I need for my Shared Ownership mortgage application?

  1. Proof of identity and address (a passport or bill is fine)
  2. Evidence of your monthly payments
  3. A stable income – payslips or tax return
  4. Proof of your affordability

How long does a Shared Ownership mortgage application take?

A mortgage application process typically takes around 2 to 6 weeks to be approved, while a mortgage offer lasts 3-6 months. The sooner you get going, the better

  • Get a mortgage advisor to help you shop for the very best deal for your circumstances.
  • Shop around to broker the best deal for what you borrow. As far as mortgage plans are concerned, it is key not to rush into anything without considering all the hidden costs.
  • If possible, it can be helpful to get rid of any outstanding debt that you may carry, as this will also improve your credit score and then possibly reduce interest fees.
  • Make sure that you have your proof of income (a summary of your yearly pay or tax returns) or any other important documents handy.

What is the Shared Ownership mortgage application process?

  1. Initial Inquiry: The process begins with an initial inquiry to a mortgage lender. This can be done directly with a lender, through a housing association if they offer assistance with shared ownership properties or a broker.
  2. Financial Assessment: The lender will conduct a thorough financial assessment to determine eligibility for a mortgage. This assessment typically involves reviewing income, expenses, credit history, and existing debts.
  3. Property Search: Once pre-approved for a mortgage, you can start searching for suitable shared ownership properties. You may be able to work directly with housing associations or browse listings on the shared ownership property portal.
  4. Offer on a Property: Once a suitable property is found, you can make an offer through the housing association or developer managing the shared ownership scheme. If the offer is accepted, you’ll proceed to the next steps.
  5. Mortgage Application: You will then formally apply for a mortgage with the chosen lender. This involves submitting documentation such as proof of income, bank statements, identification, and details of the property being purchased.
  6. Valuation and Legal Process: The lender will arrange for a valuation of the property to ensure it meets their lending criteria. Simultaneously, your solicitor or conveyancer will handle the legal aspects of the purchase, including property searches, contract review, and exchange of contracts.
  7. Mortgage Offer: If the valuation and legal processes are satisfactory, the lender will issue a formal mortgage offer detailing the terms and conditions of the loan.
  8. Exchange of Contracts: Once all parties are satisfied, the contracts are exchanged, and a completion date is set.
  9. Completion: On the agreed-upon completion date, the final steps are completed. Funds are transferred, and ownership of the property is transferred to you. This typically involves paying a deposit and any associated fees.
  10. Ongoing Mortgage Payments: After completion, you will be is responsible for making regular mortgage payments to the lender, as well as any shared ownership rent payments to the housing association.

Frequently
asked questions

As a home-buying newbie, your mind is probably racing with various questions about the process. For starters, what does Shared Ownership even mean? Don’t panic – we might have the answers you need.

What is Shared Ownership?
Shared Ownership is a house buying scheme that allows individuals to purchase a portion of a property while renting the remaining share. It provides an accessible path to homeownership, especially for first-time home buyers. Over time, buyers can increase their ownership share, potentially owning the entire property. Explore Shared Ownership further or begin your property search.
How does Shared Ownership work?
Shared Ownership offers a unique opportunity for first-time buyers to acquire a stake in either a new build house or flat, or a resale property. Here’s how it works: Partial Ownership: Purchasers buy a share of the property and pay a mortgage on that portion. Deposit and Mortgage: You put down a deposit of at least 5% of your stake and secure a mortgage to cover the remaining portion. Subsidised Rent: The remaining share is rented from a housing association at a reduced rate. Lower Deposit: Since the mortgage is only for the purchased share, the deposit required is typically lower than outright purchase. Staircasing: Over time, buyers can increase their share, potentially owning the entire property. No Rent at 100%: At full ownership, no rent is paid—only mortgage, service charges, and ground rent. Explore Shared Ownership further or begin your property search.
What properties are for sale with Shared Ownership?
Shared Ownership provides some of the very best new build properties in the market today. You have a choice to either buy a new build house or apartment, or you can buy what is called a ‘resales’ unit from an existing homeowner, who is looking to sell their home through the housing association that they originally bought it from. Explore Shared Ownership further or begin your property search.
How do I buy more shares in my property?
You can buy more shares in your property through what is called staircasing. Start by buying 10% increments with the theory that one day you can have 100% ownership of your home. Explore Shared Ownership further or begin your property search.
What is staircasing?
Staircasing is the term used to buy more shares in your shared ownership property. You can buy an additional percentage of your property at any point. Normally the minimum extra percentage you can buy is 10% at a time. Most people try to buy them in larger chunks as there are fees that you have to pay each time, so it can become quite expensive if you buy smaller percentages at a time. When you have staircased to 100% you will no longer have to pay any rent to the housing association. For more detailed information read 'what is staircasing'.
What is a Shared Ownership property?
Housing associations build shared ownership properties to address the pressing need for affordable housing options, particularly for individuals and families who may struggle to purchase a home on the open market due to financial constraints. By offering shared ownership schemes, housing associations can provide an alternative pathway to homeownership, enabling more people to access secure and stable housing. These properties are typically new builds: Meeting Demand: New construction allows housing associations to increase the supply of affordable housing in areas where demand is high. Building new properties allows the tailoring design and location to meet the specific needs of potential homeowners. Quality Standards: New build properties often meet higher quality and safety standards compared to older homes. This ensures that buyers have access to modern, energy-efficient homes with lower maintenance requirements. Long-Term Viability: New properties are less likely to require immediate repairs or renovations, reducing the risk of additional costs for both the housing association and the homeowners. Reselling homes within the shared ownership scheme is an integral part of the process: Meeting Changing Needs: As homeowners' circumstances change over time, they may decide to sell their shared ownership property. This could be due to factors such as needing more space for a growing family or relocating for work. Increasing Accessibility: Reselling shared ownership homes allows new buyers to enter the scheme, ensuring that the benefits of affordable homeownership continue to be accessible to a wide range of individuals and families. Providing Equity: When homeowners sell their share of the property, they can potentially realize equity from any increase in the property's value. This equity can then be used to finance a larger share of a new property or to invest in other aspects of their lives.
What is a Shared Ownership mortgage?
Shared ownership mortgages offer a unique pathway to owning a home. Here's a straightforward breakdown: Choose Your Share: Decide on the portion of the property you can afford, typically with guidance from the housing association. Deposit and Mortgage: Put down a deposit, usually 5-10% of your chosen share, and secure a mortgage for the remainder. Rent on the Unowned Share: While you own your portion, you'll pay rent on the part still owned by the housing association. Now, onto the types of shared ownership mortgages: Fixed-rate Mortgage: The interest rate remains constant for an agreed period, typically 2 to 5 years, providing stability in your monthly repayments. Variable Rate: Interest rates fluctuate based on the lender's decision, either tied to the Bank of England base rate (tracker) or the lender's standard variable rate.