This page is an introduction to shared ownership. There’s a lot to consider if you are thinking about a shared ownership property and you should think long and hard about if it is right for you.
What is shared ownership?
Shared ownership is very much what it says on the tin. You buy a property to live in, and you own a set percentage of it. The remaining share is then owned by somebody else, usually a housing association.
You can buy an initial share of between 25% and 75% of the property and you pay rent on the rest. In Manchester One Manchester manage most shared ownership opportunities.
Is shared ownership a good scheme?
Yes, if it is right for you.
Shared ownership is a good scheme if used correctly. Like most things with buying a house, just because you can use a certain scheme doesn’t mean that you should.
For example, a single person buying a 25% share of a 4 bed detached house in Manchester and then paying rent on the remaining 75% doesn’t seem like a wise thing to do. I believe this person would be better off in the long run buying a smaller house that suits their needs and not paying rent on something that in reality they do not need.
For a family of 5 who were currently renting, and can’t afford to buy a suitable home outright, a 25% initial share sounds like a very sensible thing to do.
If you can buy a suitable property without using shared ownership then you probably should. If you can’t, then you should consider shared ownership. A mortgage broker in Manchester will be able to go through your options with you.
Who qualifies for shared ownership?
You will need to be employed and have a total household income of under £80,000.
Normally preference is given to first time buyers and people trying to get housing after a relationship ending. Sometimes people struggling to move up the housing ladder are considered too. Check with your local housing association or Help to Buy North West.
Sometimes there are requirements that mean shared ownership properties must be sold to people with a connection to the local area.
What size deposit do you need?
At the moment you need a 5% deposit of the share you are buying. In the past there have been times when no deposit at all was needed.
For example, if you are buying a 50% share of a house with a full market value of £200,000, you would need a deposit of £5,000. You can place a larger deposit down which could help you get a better deal overall.
How is the rent calculated?
You will pay rent on the share of the property that you don’t own. The rent is usually set at 2.75% of the property value per year.
That means that if the property’s full value is £200,000, and you own a 50% share, you will pay rent of 2.75% on the part you don’t own each year. This works out to be £2,750 per year, which is £230 per month. If you own a larger share of the property your rent would be smaller, but your mortgage would most likely be greater.
Can you increase your share?
Yes. This is called staircasing
You can buy more of the property in small increments to go all the way to 100% with most properties.
What happens when you sell?
Usually when you sell you will have to offer it back to the housing association first. They will buy your share back from you at the market rate.
This means if the value of the property has increased in the time you have owned it you could receive more than you paid for your share.
What properties qualify for shared ownership?
How does shared ownership affect getting a mortgage?
Not every mortgage lender will offer shared ownership mortgages, but most do. Leeds Building Society provide a lot of shared ownership mortgages.
When deciding how much they will lend to you as well as considering your income and all the usual household expenditure, the bank will also factor in the rest that you will have to pay. This can reduce your mortgage affordability.
Read more about getting your first mortgage in Manchester.