Shared Ownership: what do you need to know?

Could Shared Ownership be the solution you’ve been looking for?

There are many government schemes designed to make buying a home more accessible for people who would otherwise struggle to generate a deposit. There are plenty of options to suit your individual situation. Shared Ownership is one of these schemes, and has grown in popularity in recent years. What do you need to know before making a decision?

The Shared Ownership scheme is an alternative route onto the property ladder. It gives borrowers an opportunity to purchase a share in either a new build or a resale home. It involves the borrower securing a mortgage for part of a house and renting the remainder. This means that both the deposit and the monthly mortgage payments are considerably lower and allows first-time buyers to make their first steps towards owning a home. Once the initial deposit is paid, the borrower becomes an owner- occupier. This means they have the long-term stability of owning a home at a more affordable price. Since 2016, the number of completions for shared ownerships has increased by over 416%.

Eligibility

Must be at least 18 years old with a maximum household income of £80,000 per annum – or £90,000 for those living in London. The scheme is exclusive to those who are unable to purchase a suitable home on the open market. The scheme only applies to borrowers who do not own a home at the time of application and don’t have any mortgage or rent arrears. Usual expectations must also be met, including displaying a good credit score and being able to pay a suitable deposit. The Shared Ownership Scheme also prioritises accepting members of the military.

How does it work?

The idea of paying rent and a mortgage simultaneously sounds expensive – but fear not. Both amounts are based on proportion. Rent on a shared ownership is typically set at approximately 3% of the unsold equity per year. Once a deposit (usually 5% – 10%) is paid, the monthly mortgage payments will be calculated, and the combined payments would usually equate to a manageable amount.

Crunching the numbers

The majority of shared ownership purchasers are between the ages of 20 and 40, with the most common age being people in their late 20’s. This shows that it’s common for first-time buyers to take advantage of this scheme. Half of all shared ownerships are taken out by single adults, likely because it’s one of the easiest ways to obtain a mortgage on a single annual income.

The average value of shared ownership properties based on the most recent data from 2019 was £265,000. Another interesting statistic is that 94% of people who utilise the scheme are in employment. It has become increasingly difficult for younger people to save for a full deposit in recent years, so the shared ownership scheme helps employed younger people to secure a mortgage without having to secure the funds for a full deposit. If you are looking for a cheaper or more manageable alternative to a traditional mortgage, the Shared Ownership Scheme is certainly one to consider.

If you’d like to discuss the options available to you, contact us today.