Shared Ownership
If you can’t afford to buy a property outright, Shared Ownership gives you the chance to purchase a percentage of the property instead. You can purchase between 25–75 per cent and pay a low-cost rent on the remaining share you don't own—the more you own the lower the rent will be.
The scheme is mostly available on new build homes or flats and is ideal for those who may need a bigger property or don't quite yet have the funds to buy a property outright.
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To be eligible, you need to meet the following criteria:
- your combined income is £80,000 or less (£90,000 in London, £60,000 in Wales)
- you are not able to afford a suitable home on the open market
- you are not in mortgage or rent arrears
- you have a 5–10 per cent deposit for your share of the property
Service charges
You will have to pay a general service charge on top of your rent for caretaking and maintenance of communal areas and ground rent. Service charges can vary from year to year and they can go up or down so be prepared for possible increases in the future. The details of service charges and rent payments will be covered in your contract and you can also speak to the housing association if you have any concerns.
Staircasing
Through a process known as 'staircasing', you have the opportunity to buy more shares of the property as and when you can afford to, eventually even owning 100 per cent of the property. Your rent payments will change accordingly and restrictions on subletting are often lifted.
If you staircase to 100 per cent, you will also be able to sell your property on the open market without having to notify housing association or be limited by the offers you can accept (see below). However, when it comes to increasing your stake in the property, it’s not just the price of buying the share you need to think about. You will also need to factor in legal fees, a RICS valuation and survey costs.
Selling a Shared Ownership property
You can sell your share of the property at any time but you must first notify your housing association and obtain a valuation from an independent RICS surveyor. The process of selling your share is known as assignment. The housing association will have the right to find a buyer (usually over an eight week period) before you can put it on the market with an estate agent, but remember there will be added fees for using an agent and the buyer must always meet the Shared Ownership eligibility criteria.
The total sum you and the housing association will receive will depend on the RICS surveyor's valuation of the property at that time—you will not be able to accept a higher or lower offer for your share in the property. However, this does not apply if you have previously staircased to own 100 per cent of the property.
Simultaneous staircasing
It is also possible in most circumstances to sell 100 per cent your property to a buyer even if you don't own the full 100 per cent of the property. You are still limited to the RICS valuation of the property and can only accept the considered market value for the property at that time.
During completion you will staircase to full ownership of the property (using the buyer's funds) before selling to the buyer, this is handled by your solictor and usually incurs an extra cost compared to the more standard assignment process. The main benefit of simultaneous staircasing is that the buyer does not have to meet the Shared Ownership eligibility criteria which therefore increases your potential for a sale.
Help to Buy
Help to Buy schemes (also known as equity loan schemes) assist first-time buyers, or existing homeowners, who wish to purchase a new-build home. The main benefit is that you don’t need to save as much for your deposit. You often need a lower deposit than normal as the Government provides a loan to cover part of the property's cost, although you will still need a mortgage to cover the rest.
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Help to Buy: Equity Loan is available in England to both first-time buyers and homeowners looking to move. It applies to new-build properties worth up to £600,000 and works by reducing the deposit you pay to five per cent of the property's price.
It offers an interest-free loan from the Government (for the first five years) for a further 20 per cent of the property's value. In year six, interest known as a 'loan fee' kicks in at 1.75 per cent, which then increases each year thereafter at the RPI (retail prices index) measure of inflation plus one per cent.
Mortgages in conjunction with Help to Buy are offered by most major lenders including Santander, Woolwich, NatWest and Halifax, as well as several smaller building societies. If this is something you are interested in, look out for the Help to Buy logo on new-build developments or get in touch with your local Help to Buy agent.
The Help to Buy criteria for Scotland is as follows:
- maximum property price is £200,000
- need a combined mortgage and deposit that’s at least 85 per cent of the price
- most mortgage lenders will ask for at least a five per cent deposit, so your mortgage needs to cover 80 per cent of the property price
- get a interest-free loan of up to 15 per cent of the property’s price from the Government
- it can either be paid back or taken when you sell the house (as a percentage of the price sold)
- must use a repayment mortgage (not an interest-only mortgage) from a qualifying lender
- must use a home builder registered with the Help to Buy scheme
The Help to Buy criteria for Wales is as follows:
- maximum property price you can buy is £300,000
- minimum five per cent deposit
- 20 per cent Government load available
- must use a repayment mortgage (not an interest-only mortgage) from a qualifying lender
- needs to cover at least 80 per cent of the property price
- must use a home builder registered with the Help to Buy scheme
A similar scheme existed in Northern Ireland but closed in 2016.
Lenders still provide 95 per cent mortgages, meaning you would just need a five per cent deposit; but these are likely to come with high-interest rates and could result in your borrowing more money than your home is worth if house prices fall. It's recommended that you consider looking for a more affordable home and saving for a larger deposit instead.
Right to Buy: buying your council home
The Right to Buy scheme allows you to buy the home you live in for a discounted cost if you’re a tenant in a council or housing association property.
The scheme is ideal for those who may be on a lower income and want to get on the property ladder. However, Right to Buy ended 2016 in Scotland and 2019 in Wales on the argument that it reduces the amount of social housing available.
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The first thing to consider is your eligibility, you will only be able to take advantage of Right to Buy if:
- you are a secure tenant
- the property is your only/main home
- it is self-contained (all the facilities are within the property)
- you’ve had a public sector landlord for three years
If you fit the criteria and want to buy the property you live in then a discount will apply to the value of your home. This means borrowing less money through a mortgage when you buy it. The maximum discount available is £82,800 in England and £110,500 in London boroughs. See below for how the discount is calculated.
BUYING A HOUSE
The discount is 35 per cent if you’ve been a tenant between three and five years. The discount goes up by one per cent for each year after the five years. So, if you were a tenant for ten years, the total discount would be 40 per cent.
BUYING A FLAT
You get a 50 per cent discount if you’ve been a tenant between three and five years. After five years, the discount goes up by two per cent each year. So, if you were a tenant for ten years, the total discount would be 60 per cent.
The scheme is referred to as the House Sales scheme and whilst the eligibility criteria mirrors the scheme in England, the discounts are different. On top of this, one and two bedroom ground floor flats and sheltered housing are not available.
Eligibility criteria:
- you are a secure tenant
- the property is your only/main home
- it is self-contained (all the facilities are within the property)
- you’ve had a public sector landlord for three years
Discount:
- 20 per cent if you’ve been a tenant for five years
- goes up by two per cent for every extra year. So, if you were a tenant for ten years, the discount would be 30 per cent
- maximum discount available is 60 per cent or £24,000 (whichever is cheaper)
Next step
Before you can buy the property, you need to ask your landlord if they agree to sell. The Government's website will guide you on what you need to do and when you should expect a response.
Rent to Buy/Own
Rent to Buy (or Rent to Own as it's known in Wales and Northern Ireland) allows you to rent a property for less than the market price, for a set amount of time. You are expected to use the money saved from the lower rent for a deposit to buy the property after the tenancy ends. You can also use the money saved for a deposit towards another property if you prefer.
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The scheme is only available on select new build homes and depends on which part of the country you're looking. Since Rent to Buy is only available on a select number of properties from different housing associations, make sure you check the terms of each property and association.
Currently, the way it works is that you rent the property for a period of up to five years at around 20 per cent less than the market rate. Once the five years are up, you can either buy the property outright with a mortgage and deposit or choose to buy a share through Shared Ownership. Alternatively, you can leave the property altogether and use the money saved for a deposit elsewhere.
Key things to note are:
- your lease can last between six months and five years
- you can make an offer or commit to shared ownership at any time
- you will pay 80 per cent of the local market rent
- your combined income must be £60,000 or less
Rent to Buy in Scotland
Although the scheme exists in Scotland, it's harder to search for available properties. The best method is to look-up and contact your local housing association to find out if any properties are part of the scheme.
In Wales, the scheme is known as Rent To Own and takes steps to ensure that you still have money for a deposit at the end of the tenancy. Key things to note are:
- rent a property for up to five years
- choose to buy the property from the start of the third year until the end of the fifth year
- you can choose to opt for Shared Ownership instead of buying the property
- you must earn less than £60,000 as a combined income
- must be the only property you own or live in
When you decide to buy you will be given an amount towards your deposit which will be:
- 25 per cent of the total rent you have paid so far
- 50 per cent of any increase in the property’s price
IF THE PROPERTY'S PRICE INCREASES
EXAMPLE: if you rent a house worth £150,000 when you move in, which later rises to £160,000 when you decide to buy, the increase would be £10,000 so you would get £5000 (50 per cent).
Northern Ireland’s Government-approved Rent To Own scheme is managed by Co-Ownership.
Key things to note are:
- must be a new build property with a 10-year warranty
- must be under £165,000
- cannot be a one-bedroom apartment/house
- must be ready to live in
Whatever rent you pay, 25 per cent will be paid towards the purchase of the property. The tenancy agreement lasts for three years and you can purchase the property any time after the first year, or after the tenancy ends. It is recommended you wait longer so you can save more through the rent you pay.
Homebuy scheme in Wales
Similar to the Help To Buy scheme, Homebuy allows you to buy a property on the open market rather than just new builds. The Homebuy scheme is designed to benefit those from rural communities most, where it may be more difficult to purchase a home.
The scheme operates as follows:
- you provide 70 per cent of the property’s price through a mortgage or personal savings
- the mortgage must be from an approved lender
- your housing association provides an equity loan of 30 per cent towards the property
- you pay back the equity loan at any time or when you sell the home; it will always be at 30 per cent of the property's current worth
To be eligible you must fit the following criteria:
- you are not adequately housed or cannot afford to live in your current home
- you are not able to buy a suitable property for your needs without the scheme
- you are able to get a mortgage for the property
- you meet the criteria set by the local authority/Registered social landlord that operates the scheme
- you are not receiving Housing Benefits
Visit the Welsh Government's website to find out more.
Shared Equity in Scotland
The two Shared Equity schemes help buyers on lower incomes to purchase a property for a certain percentage of the full price, with the Scottish Government paying the rest.
New Supply Shared Equity
This scheme is for buying new build homes from a housing association or your local council. Priority will be given to:
- people aged over 60
- social renters (people who rent from the council or a housing association)
- disabled people
- members of the armed forces
- veterans who have left the armed forces within the past two years
- widows/widowers and other partners of those in the armed forces for up to two years after their partner lost their life while serving
- those who have experienced a significant change in living circumstances, e.g. splitting from a married partner
You need to have a combined deposit and mortgage that covers 60–80 per cent of the price of the home you want to buy. The Government will then cover the cost for the remainder of the price. When it comes to selling the property, the price it sells for will be split between you and the Government depending on what percentage of the house you bought. Visit the Scottish Government's website to find out more.
Open Market Shared Equity
This works almost identical to the New Supply Shared Equity scheme but applies to homes for sale on the open market, instead of new builds. You are also able to contribute a combined deposit and mortgage of 60–90 per cent of the property. Visit the Scottish Government's website to find out more.
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