Shared ownership
Want to get a foot on the property ladder but can't afford a mortgage? You're not the only one, but there are schemes available to help you.
Even though they've dropped dramatically, house prices are still out of reach for many people, particularly those living in cities or the south-east of England. But you may have seen houses advertised at remarkably low prices for a percentage share in the property.
These schemes are known as shared ownership, and were created by the government to allow more people to own their own home.
How do they work?
There are different schemes available, which can be as diverse as buying a share of a new build to a houseboat in Peru, but it depends on what best fits your situation. No matter what the circumstance, they're all designed to support you purchasing a property, either by lending you some of the money, or retaining ownership of part of the property and renting it back to you.
Most schemes encourage you to buy a new build and offer big incentives: you have the option of buying from 25% up to about 75%, depending on what you can afford. If, however, you like the look of an older property, you are entitled to a discounted loan for up to 50% of the value of the property.
For the percentage that you buy, you need to get a mortgage in the usual way - although you may be restricted to certain banks or building societies - and you'll be expected to make regular repayments as normal. However, for the percentage you don't own, you'll need to pay rent or interest to a local authority or housing association. The larger the share you buy, the less rent or interest you have to pay. But in all cases, it will be less than the equivalent mortgage, so your monthly costs are cheaper than if you were to buy the whole property.
Who qualifies?
The scheme is intended for people who cannot afford to buy a suitable home in any other way. To qualify you must usually be a first-time buyer, and priority is given to local authority or housing association tenants. Other people in need of housing may also be considered for the scheme. You must also be able to get your own mortgage to meet the purchase costs on the percentage you buy.
Some schemes are only open to 'key workers' - people in public sector jobs, such as nursing, the police or teaching.
The upside of shared ownership is you get the best of both worlds, you have your own place without having to pay for a full mortgage
Is the property mine?
Generally, you'll be treated as the owner of the property in the same way as you would if you just had a mortgage. So you can decorate as you wish and you'll also be responsible for all the bills. Buildings insurance is usually covered in your rent, as is any ground rent or service charges.
Most schemes require you to get permission before doing anything that would alter the value of the property, such as adding an extension or converting a loft, and usually you can't sublet the property or run a business from it. If you want someone to move in with you, you may well have to renegotiate.
Over time, as your income increases, you can increase the share of your property until you own it outright. At that point it becomes yours and you won't have to pay any more rent.
What are the downsides?
The upside of shared ownership is you get the best of both worlds, you have your own place without having to pay for a full mortgage; the downside is that you get both sets of problems. Your mortgage can be affected by interest rates, and you won't be able to move house until you find someone to move in.
But the main issue is that because you are renting part of the property, you will end up paying twice. In effect, the money you paid in rent doesn't go towards the cost of the property. That said, you'll be losing less than if you continued to simply rent a place, so it's not all bad news.
How do I qualify?
If you live in England, you can find more information about Shared Ownership schemes on the Homes and Communities Agency website.
In Scotland, shared ownership schemes are sometimes known as joint venture schemes, and run by the Scottish Housing Regulator. In Wales, schemes are run by various local housing associations. In Northern Ireland, the Northern Ireland Co-Ownership Housing Association runs a similar scheme, called the co-ownership scheme.
You can normally apply direct to a housing association running a scheme, although some schemes are only open to people registered with their local council. Most schemes have restrictions, such as you must live or work in the area already, and not be earning above a certain amount. You can usually find out about local schemes by contacting the housing department at your local council, and they are often advertised in newspapers and on housing websites.
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