A guide to buying your first home can be overwhelming but Betesh Middelton Law are here to guide you through the process. Is shared ownership an option you have considered for buying your first home? With shared ownership, homebuyers have the opportunity to purchase a share in a new build or a resales property. You would pay a mortgage on your share, as well as rent to a housing association on the rest of it. As the buyer will only require a mortgage for their share, the deposit will be significantly lower than if you were to buy outright.
The buyer can choose to increase their share while living in the property. As a guide to buying your first home, this process is known as “staircasing” and often ends up with the buyer staircasing up to 100 per cent ownership. It is also worth noting that shared ownership properties are always leasehold.
Should you buy a shared ownership property?
Shared ownership is often a choice for those who would like their own home but cannot afford to buy outright on the open market. If you’re wondering how you can make savings on a shared ownership property, here is a breakdown:
- Less rent than you would pay on the open market (often charged at 2.75 per cent of the property value per annum).
- Some can start with as little as a 25 per cent ownership.
- The deposit you put down can be as little as 5 per cent of the share, not the entire property.
- You can usually defer your stamp duty until you reach 80 per cent
You will often find shared ownership properties in private developments. This is because they tend to be part of a planning development, which can help to create affordable housing in better areas.
So, what exactly am I buying?
You are essentially buying a leasehold property that can be either new or a resale. However, given the fact that you cannot afford to purchase the property outright, you will pay rent on the portion that you cannot afford.
As mentioned, you have the choice of buying further shares, up to 100 per cent of the property when you are in the position to do so. However, keep in mind that the cost of this will be based on an independent valuation of the property at the time you choose to purchase more.
What are the eligibility rules for Shared Ownership?
Like with any property, you will have to meet some general eligibility requirements if you intend on buying a shared ownership home. These include:
Having an annual household income below £80,000 (£90,000 in London)
- Being at least 18 years of age
- Being a first-time buyer, currently without ownership of a property or currently in the process of selling.
- Being unable to buy a home suitable for your needs on the open market
- The ability to access at least £4,000 to cover the costs of buying without any problems (guideline figure)
- Having proof that you are not in mortgage or rent arrears
- Good credit history
It is worth noting that you should always check the eligibility requirements with the housing association when you sell the property as it could differ from others.
Cover all bases with the best solicitor
No matter the type of property you choose to buy, having a solicitor by your side will ensure a smooth process along the way. Get in touch with Betesh Middleton Law to see how we can help you when buying your next home.