What is Shared Ownership?
Shared ownership is where you buy a share of a property, normally alongside a developer or housing association.
Shared ownership is not the same as owning with a partner or friend.
The initial purchase is usually between a 25% and 75%. Shared ownership allows those who don’t have the income or deposit to get a mortgage on an outright purchase to get on the property ladder.
You then have the option of purchasing more of the equity or all of the property once your financial position improves, this is called stair casing.
The developer or housing association owns the remainder of the property but charges you market rent for that portion. For example: you own 40% of a £150,000 property you will own £60,000, the developer will be able to charge you rent on the other £90,000.
Not everyone can buy a shared ownership, you must not own a home already and must earn under £80,000 as a combined household; If using the scheme in London, combined household income must be under £95,000.
All shared ownership properties are leasehold properties, this means you may need to pay ground rent and service charges.
You can sell your shared property at any time, you will owe the other shared owner the percentage of the current market value. So for example: You own 40% of a property bought for £150,000. You want to sell it 10 years later and the property is sold for £250,000.The developer will be entitled to 60% of that amount. The developer may require an independent valuation to confirm that £250 is a fair market value.
You get a foot on housing ladder and the option of increasing your share until you own it outright.
Deposit required is much less than a normal purchase.
You benefit from any increase in the value of property (but also have risk of price falls)
It some cases it is cheaper than renting the property.
It is your property, so worth investing in upkeep/renovation.
If market falls and you need to sell the property, only your share of the value of the property is at risk.
Limited number of shared ownership properties and sometimes only available on the worst plots/locations.
You pay both a mortgage and rent (although this is often comparable or less than market rent)
If you are looking to staircase in an inflating market it becomes more expensive to buy an extra share.
You don’t have full control of the sale of the property, you are constrained by your agreement with the lender and developer.
Consideration for Shared Ownership
You will see shared ownership properties on the market for substantially less than comparable non-shared properties. This is because you are only buying a share of the property. Generally, you should ignore shared ownership from your research of a “standard property”. However, if there are a lot of shared ownership in an area it may show that demand is low generally and developer is desperate to sell.
Can Quick Move Now buy Shared Properties?
If we are approached to buy a shared ownership property we are only able to buy the whole property. We cannot buy just a share. Meaning the client, the mortgage company and the developer must agree to sell. The mortgage company will only sell if the whole mortgage is redeemed and the developer for 100% of the market value of their share.
There are various affordable home ownership schemes available to assist people onto the property ladder. Learn more about the schemes.