Deciding to buy a property for the first time is a big decision. There are plenty of things to consider, not least, the financial commitment that buying a property can bring. Bearing this in mind, the UK Government have launched a specialist scheme for this very reason in order to assist first time buyers in getting on to the property ladder.
Under the umbrella of the Help to Buy scheme, the shared ownership scheme was introduced as far back as the 1970s. However, it is arguably in more recent years that shared ownership has taken precedence and has become a popular choice for homeowners.
Shared Ownership is a Government-backed scheme principally for first-time buyers who are unable to afford a suitable home at the full market price. It was initiated by the Government to give first-time buyers an opportunity to participate in the residential property market.
Shared Ownership is the process whereby you can purchase a pre-determined percentage of a property and you therefore do not own the entire property. The percentage you own can vary from 25% - 75%, depending on your specific financial situation. Shared ownership can be an ideal way for first-time buyers to get onto the property ladder and who may not be able to commit to purchasing a property in its entirety.
Over time, you can apply to own a larger percentage share of your property. This process is known as ‘staircasing’. There limitations as to the number of times you can ‘staircase’, however, dependant on a number of factors, staircasing can facilitate you going from owning a minimal share of the property to owning a significant percentage which when you come to sell offers you a much greater financial advantage.
With the shared ownership scheme, you will share ownership of your property with by and large a housing association, paying subsidised rent on the remainder, which is calculated at 2.75 per cent per annum.
To be considered for the Shared Ownership scheme, your yearly household income must be below £80,000.
Those who already own a home are not eligible for shared ownership opportunities but this does not mean you will not qualify on certain housing schemes; you will just need to sell your home to be considered.
Additionally, the total monthly outgoings for your shared ownership property must fall on or below 45% of your salary. If the outgoing costs are above this bracket, you will not be eligible, given that you will not be deemed a financially viable party at this point. In the eyes of the mortgage lender or house association, there is an element of course a risk, given that you will not be able to meet payments.
A shared ownership mortgage works in a different way to a regular mortgage. Depending on the bank or building society you decide to take a mortgage out with, there will be different rules and lending policies in place. Some lending institutions do not offer mortgages for shared ownership. Similarly, some do but have very specific requirements regarding the initial deposit you have to put down and this may be a minimum of 20 % of the share value.
For more advice on current market trends and mortgages, reach out to The Money Consultancy, based in Oxford and Kidlington. You can visit their website or ring 01865 553039 for more.
The timing of the entire process will depend on a number of factors but can take as little as a few weeks, depending on the circumstances. The main steps to buying a shared ownership property are as follows:
If you decide you want to sell your property at some point in the future, then this will involve a number of steps:
Note: WEST-The Property Consultancy offer a free, no-obligation valuation of your property. Click here to find out more.
The best way to apply for shared ownership is to look into your area to find out about local shared ownership opportunities. For more information, head to the Government’s web page about the shared ownership scheme to see if it can help you.
Still not sure? Contact us today to see how we can help you buy your first home.