For many, being able to afford a property means looking at shared ownership, This week’s feature looks at what’s involved with shared ownership where you own part of a property with a Housing Association or Housing Trust. These organisations are known as Registered Social Landlords (RSL).
Shared Ownership is a part buy, part rent scheme and typically the properties, part owned by the RSLs have either been renovated or built by them.
Who can take up shared ownership?
Young professionals seem to be the group most interested in shared ownership. They tend to be well educated, earning a reasonable salary, yet still unable to afford to buy a first home in their area of choice because of the high property prices across many parts of the country. They see the merit of owning a property and are frustrated at the apparent waste of money paying rent.
For many of the schemes, though not all, you must be considered to be in housing need and be unable to afford to buy a property in any other way. Criteria affecting eligibility may be age, status, profession, salary, number of dependents. Sometimes, young single professionals may not be considered in housing need and may not be able to apply and go on the housing list. They go on to consider other options such as joint ownership rather than shared ownership.
There are a finite number of Housing Association properties becoming available at any one time and sometimes the waiting period for a property can be quite long, or there be nothing available at all. Other solutions, again, such as joint ownership are often looked at as alternatives
Some RSLs offer non-government funded schemes, which run along the same lines, as do some private developers. You buy a share of a home with a mortgage or savings, normally around 25% to 50%, sometimes up to 75%, and you pay a subsidised rent to the housing association on the part you don’t own. You can increase your share as and when you can afford to. The larger share you buy, the less you will have to pay in rent.
Prices of properties will, of course, vary according to location. You still have the rights and the responsibilities of home ownership even though you will not own the property outright.
Selling
You can sell the property at any time but must notify the social landlord in writing. If you can afford to buy the remaining share of the property you can sell it outright, or just sell the part you own. You should be aware that because house prices can go up or down, you might have to pay more for additional shares in the property or you might have to sell at a lower price than you paid originally.
Many housing associations will have included a clause in the lease so that they can put forward a new buyer for your home. This can speed up the process for you as they will keep a list of those interested in shared ownership. They may also charge you a small fee for undertaking this.
Buying
Most banks and building societies are happy to lend on shared ownership properties, some up to 100%. Normally, you get tax relief on the first ?0,000 of your mortgage. You should be aware that if you are buying a property that’s part of a block you will be charged an annual management fee.
It is possible to buy a property through shared ownership as joint owners. Up to four people can buy together but will have to apply individually and meet the eligibility criteria jointly.
Making improvements to the property
If you want to make improvements to the property you are buying you will need to ask for written permission from your social landlord. Although they will make sure that the structure of your house is sound, it will be up to you to get any repairs done and decorate it both in and out.
If you are buying a flat then the internal decoration is your responsibility but the management fee you pay will go towards the general upkeep of the building, which the social landlord is responsible for. You must work with your solicitor to understand your responsibilities.
What's the process?
The first step towards shared ownership is to contact the housing association, social or private developer. You may then be invited to meet with them to discuss your application further.
The next stage is to look at the property available and agree a price and the proportion of the share you want to buy. When this has been agreed you should then approach a mortgage company. The Housing Corporation at www.housingcorp.gov.uk offers helpful guidance on the things to consider when buying through a shared ownership scheme.
To find out which RSLs cover the area you would like to buy in go to www.housingcorp.gov.uk where you can search by location.
Shared Ownership schemes run by property developers
Some property developers are offering shared ownership schemes. They work along the same principle as a shared ownership scheme run by an RSL. The buyer buys part of the equity of the property and the developer retains ownership of the rest. The buyer can then, at a later date, buy the remainder of the property from the developer.
Unlike a shared ownership scheme run by a housing association the developer does not charge interest on the deferred amount and there is no rent. With some schemes, if you own 25% per cent of the property for example, you will have to pay that proportion to the developer when you move.
Other incentives are on offer by some property developers aimed at helping first time buyers. Some will pay up to a 5% deposit. They may offer to pay Stamp Duty on a property. Many properties come fully equipped with white goods, they may have fully fitted kitchens and may even be carpeted throughout. For a first time buyer struggling to get the finances together not having to pay these starts up costs can be a big advantage.
Buying a new property also means that there will be no chains involved and there should be lower maintenance costs.
Developers may offer mortgages at preferential rates through links with certain mortgage lenders. It is always wise to make your own enquiries of other lenders to ensure that you are being offered competitive rates.
