Should I consider a shared ownership property?

Sarah Barnes - February 2nd 2017

What is shared ownership?

Shared ownership offers you the chance to purchase a share of your home.  As a buyer, you can purchase a stake in your property, usually between 25 to 75%.  The housing association owns the remainder.  You will then pay rent to the association on the share you don’t own.

Is shared ownership an alternative to renting?

Shared ownership enables first time buyers to take their first step on the property ladder. Owning a shared ownership property is usually a cheaper option than renting (although there are always exceptions to this). Housing associations take average rent levels into consideration when deciding what proportion of a flat to sell and how much rents will be. This is to ensure that shared owners are not any worse off than local renters. The point of shared ownership is to give people a viable alternative to renting.

Service charges

All shared ownership properties are leasehold, and as such, the property will be subject to service charges. Put simply, a service charge is a contribution made by each property owner in the development towards the maintenance and buildings insurance for the development as a whole. It is important to be aware of the fact that even though you may only own a share in the property, you will still be liable for the full service charges attributable to the property.

How much deposit will I need to pay?

Most housing associations ask for a 10% deposit, but only of the share of the home you are buying, not 10% of its full market value.

Are there any restrictions I need to be aware of?

As the property is leasehold, there will be a number of rules and regulations which you will need to comply with. There will be restrictions on subletting, pets and making any proposed major alterations to the property. Your property lawyer will be able to explain the provisions in more detail.

Can I sublet my property?

Normally, a lodger will be able to live with you at the property. Also, most shared ownership properties will allow you to let the property on holiday letting sites such as Airbnb, but for no more than 90 days per year. However, you cannot rent the whole of the property out without the consent of the housing association.

If you do need to sublet the whole of the property, due to specific circumstances, then it is worth approaching the housing association directly, as they may provide consent on a case by case basis, although this cannot be guaranteed.

Can I get a mortgage?

Most lenders are up to speed with shared ownership. Shop around and speak to a local mortgage broker who has access to a range of products.

Can I increase the size of my share?

You can buy a larger share of your property from the housing association, in a process known as stair casing. The association may agree for you to increase your share 10% at a time. There are costs involved in the process. Stamp duty payments will need to be taken into consideration. There will also be valuation costs which will be approximately £150 to £200. This is due to the fact that if you staircase, you must pay for an extra share of the current value of the property, not what you paid initially.

Whether you are looking to purchase or increase your share in a shared ownership property, we are happy to assist and provide you with further advice and guide you through the process.