What is Shared Ownership?
Due to rising property prices, ownership of a property is now beyond the means of a large portion of the population unless you earn a salary well above the average.
Shared Ownership was introduced to help those people who are unable to afford to buy a property outright. Through the scheme, a share of the property can be purchased and you pay a rent on the other share of the property which remains in the ownership of a housing association.
It is possible to buy further shares in your home; this is known as 'staircasing'. It must be remembered, however, that house prices can go up or down, which means you may pay more for additional shares or, if you decide to move, you may have to sell at a price less than you originally paid.
How Does Shared Ownership work?
The share you purchase will normally be funded by a mortgage which you will need to arrange through a bank or building society. You will then pay rent on the proportion of the property still owned by the housing association. The size of the share purchased can vary between 25% and 75% dependent upon income and savings, but most applicants buy a 50% share. The larger the share you buy, the less rent you will have to pay. You must also bear in mind that if you buy a flat, you will have to pay a service charge.
When a purchase is made through shared ownership, the housing association will grant you a lease which sets out your rights and responsibilities.
What is a Shared Ownership Lease?
No matter what type of property you buy under the Shared Ownership scheme, the housing association will grant you a lease, which usually runs for 99 years. This lease entitles you to live in your home as an owner-occupier. It also entitles you to buy further shares in the property and explains how this can be done.
Your lease will also set out your responsibilities for repairs to your property, the payment of rent etc. Although you have not bought your property outright, you will have the normal rights and responsibilities that come with home ownership. It would be wise to take your own legal advice on the terms and conditions of the lease.
What costs are involved with Shared Ownership?
Before deciding whether Shared Ownership is for you, it is important to think about the costs involved in purchasing and running your own property.
Legal Fees
It would be advisable to get a solicitor or licensed conveyancer to assist you in the purchase of your share. As fees can vary, it is worth obtaining an estimate for their services before engaging a legal representative.
Deposit (if required)
You may be required to put a deposit down on the property.
Stamp Duty
You will need to check with your solicitor or licensed conveyancer whether Stamp Duty is payable at the time of purchase. This is tax on the transfer of property. If it is payable, you can either pay the duty on your share of the property or on the total value of the property. Your solicitor/licensed conveyancer will advise you on the best option to take.
Mortgage indemnity insurance (if required)
Your mortgage lender may require you to take out mortgage indemnity insurance.
Removal Costs
Dependent upon the distance you are moving, these can be quite costly and, therefore, must be taken into account when assessing the cost of purchasing a share in a property.
Running Costs
Once you have considered the initial costs involved above, you will need to think about how much it is likely to cost you to run and maintain your home.
Mortgage Repayments
You may need to borrow all, or at least part, of the the cost of your share from a bank or building society in the form of a mortgage. The amount you have to repay will vary, according to the amount borrowed, the length of the mortgage, interest rates, and the type of mortgage.
Rent
Because you have purchased a share in the property, you must still pay rent on the share owned by the housing association. The monthly rent will be based on the rent for the total property and the amount charged to you will be calculated on several factors. These include the amount of share you own, the repayments you make as an owner-occupier, and your share of any insurance, maintenance and repairs. Once these have been taken into account, the rent will be less than the normal rent you would pay if you were renting the whole property. The rent proportion is usually reviewed every year.
Council Tax
You will be responsible for paying the council tax for the property.
Repairs, Insurance and Service Charges
If your home is a flat, all repairs and redecoration inside the property will be your responsibility. The Housing Association must ensure that the building within which your flat is situated is in good structural repair, will insure the structure and keep all communal areas (such as staircases and corridors), lit, decorated and clean. A share of this cost will be passed onto you in the form of a service charge. The housing association must tell you how this service charge is spent and consult you before any major repair or maintenance work is undertaken. If your home is a house, you are responsible for all repairs and redecoration, both inside and outside of the property. The housing association will insure the structure of your home. You will have to pay a small management charge to cover this and to help meet the costs of rent collection.
Other Costs
You are of course responsible for your own bills for heating, lighting and water rates, and for supplying your own fittings and furniture in the property. You will also be responsible for the cost of insuring the contents of your home.
How can I be considered for Shared Ownership?
To apply for shared ownership, please contact the Zone Agent for Hampshire, Swaythling Housing Society on 023 8062 8000 or at www.homesinhants.co.uk.
You should also be on the Housing Needs Register or registered for a transfer to alternative accommodation. You can download a Housing Needs Register form at the bottom of this page.