Shared Ownership and Shared Equity – Explained
Shared ownership means owning part of a property with another party (usually a Housing Association) and paying rent to them for the part that they own but allow you to live in. They do not live in the shared ownership property with you. You can increase your share as time goes by, sometimes to 100%, this is called ‘stair casing’.
To progress with shared ownership, you will need a shared ownership mortgage. Shared ownership means having to save for a smaller deposit and a taking out a smaller mortgage as you will only own part of the property. If you have some deposit saved, contact a mortgage advisor about the shared ownership mortgage.
The main advantage of shared ownership is that it can make getting onto the first rung of the property ladder affordable. Another great advantage of shared ownership properties is that they tend to be new or refurbished. In some areas, stamp duty on shared ownership property is waived.
I most instances you will need a small deposit, a shared ownership mortgage to buy your share and a sum of money to pay for administration costs.
Shared ownership mortgages are offered by many mortgage lenders and if you are considering taking out a shared ownership mortgage you should seek specialist, no-commitment, shared ownership mortgage advice.
Shared Ownership in a nutshell:
- You own part of the property and pay rent to a co-owner in addition to your mortgage payments
- Usually operated though local council or housing association
- Brand new and refurbished properties available
- Properties available on open market ( see sites like Rightmove, Zoopla and Prime Location)
- You can start owning as little as 24% of the property and buying more kjnow as staircasing. Rents derease
- The deposit and mortgage requirement sill be lower as you are only buying part of the property
- You still need between 5 and 10% deposit but just of the share you are buying
- Service charges can bump up monthly costs
You will You will need to contact an independent shared ownership mortgage advisor to assess your requirements and they may also put you in contact with the right HomeBuy agent. You are under no obligation when you contact a mortgage advisor.
When people talk of ‘do it yourself shared ownership’ they usually mean buying property with another investor, taking out a shared ownership mortgage on the part you own and paying rent to the other private property investor for the remainder.
If you are thinking of buying a property with a friend, family member, stranger or co-investor, this is known as joint ownership or joint equity. This can be combined with shared ownership.
Shared Equity in the UK is on the decline as the government’s shared equity schemes have ended. Shared equity was the basis for the Government’s Open Market HomeBuy scheme was the basis of the Government’s initiative for buying new homes (now scrapped). The replaced Help to Buy schemes are also due to be phased out imminently also.
Request Mortgage Advice if you have gathered a deposit and want to buy your first home. Our mortgage advisors have details of all the best current first time buyer deals.
Shared Equity in a nutshell:
- You own the property and there are no rental payments
- Usually offered by your local housing association under HomeBuy Direct (household income must be under £60,000pa) or through a house-builder ( these schemes can vary)
- You must be a first time buyer, key worker, housing association or council tenant or be in housing need
- The Housing Association will provide you with a top up low or no cost ‘equity loan’ providing the lion’s share of the deposit, usually up to 20% of the purchase price and the remainder is financed by your deposit and mortgage
- You are normally entitled to repay all or some of the equity loan either by sale of the property or by refinancing your mortgage at a later stage, The equity loan is interest free for the first 5 years
- Currently you will need at least a 5% personal deposit
- When you sell the property you will need to replay the equity loan remaining and a proportion of the equity growth that reflects the proportion of the equity loan remaining
- You must not be a home owner ‘on completion’ of the proposed help t buy completion.
With shared equity, the buyer does not own the property in conjunction with any other party (unlike shared ownership) but takes out more than one loan for the property. A mortgage and an ‘equity loan’. You are the only person on the deeds. There is no co-owner. However, when the property is sold, the ‘first time buyer’ has to repay the loans AND a proportion of any increase in equity of the property to the party making the ‘equity loan’.
A mortgage advisor will be able to offer mortgage advice on a shared equity mortgage and which one would be right for you.
You will also need to take a local conveyancing/property solicitor on your exciting journey.