Shared ownership is a Government- backed scheme that helps first time buyers take a first step on the housing ladder. Established over 40 years ago, around 200,000 households already live in shared ownership homes, and the scheme is growing rapidly in popularity as rising interest rates have made it harder for many first time buyers to purchase a home on the open market. WHAT IS SHARED OWNERSHIP? Shared ownership is the most affordable way to take a first step on to the housing ladder. Kay Hill looks at how the scheme works SHARED OWNERSHIP EXPLAINED WHAT IS THE SCHEME? Shared ownership helps lower income individuals and families take a first step on to the housing ladder by buying a share of the leasehold of a house or apartment from an accommodation provider such as a housing association and paying a controlled rent on the other portion. The amount they are able to buy varies according to the family income, the home and the provider, but starts from as little as 10% of the full market value of the
property in the latest schemes. Over time, buyers can purchase additional shares in a process called “staircasing”, which means they can ultimately own the whole home and no longer pay rent. This is a very real possibility – data shows that around 2,000 shared owners staircased to 100% ownership last year in London alone. WHAT IS THE ADVANTAGE?
The biggest barrier to homeownership for many households
is saving up the deposit. According to the
Halifax House Price Index, the average house price in June 2023 was £285,932, which for a family buying on the open market with a 90% mortgage would mean a £28,593 deposit. Buying 25% of
the same house using shared ownership, however, would require a minimum 5% deposit of just £3,574, putting it within reach of far more potential buyers. For buyers in London, the difficulty of saving a deposit is even more acute, with the average £533,057 home requiring £53,306 for a 10% deposit, while a 25% shared ownership share could be accessed with a deposit of £6,663. Many buyers also struggle to borrow enough money from mortgage providers to buy on the open market – with shared ownership you only need a mortgage for up to 95% of the share you are buying, reducing the income that is required. HOW IS IT DIFFERENT TO RENTING? With shared ownership, as well as paying a mortgage, you also pay rent on the percentage of the property that you haven’t bought, as well as a service charge; but there are significant differences between shared ownership and just renting.
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