The government is offering a few different schemes to help people get their first foot on the property ladder. You may have heard of how they help first-time buyers for example, but do you know how they can help those who can't afford a mortgage for the total value of a house?
This is known as Help to Buy: Shared Ownership. If you're struggling to afford to purchase a house with a mortgage, you can enter shared ownership where you own between 25% and 75% of the house's value. The remainder of the value you would have to pay rent for. Over time, you can buy more and more of the property outright.
Who is eligible for shared ownership?
The main criteria to be able to purchase a home through shared ownership is to do with household income, if you live in or out of London, and your purchasing position:
- if you live out of London: your household would earn £80,000 per year or less to be eligible
- if you live in London: your household would earn £90,000 per year or less to be eligible
- you previously owned a house but can't afford one now, you're a first-time buyer, or you're an existing shared owner hoping to move
What are the positives of purchasing through shared ownership?
Not sure if shared ownership is for you? We've picked out some of the pros of shared ownership to help:
- you can start by purchasing as little as 25% of the house's value
- 5% deposit on the proportion of the house you're buying is all that's needed
- the rent you'd pay on the remainder is less than that on the open market
- stamp duty is deferred until you own 80%
- it's an easier way to get on the property ladder if you can't afford to buy
- it can open up more choice of mortgages if you don't need to borrow as much
- you don't need as much money saved for a deposit
- lower payments each month compared to renting or a full mortgage
- you can sell your share of the house at any time
- you can gradually purchase more and more of the home
- security is better than for renting
Just take into account these negatives to get a rounded view:
- compared to purchasing a property without shared ownership, you may find you have limited options for a mortgage
- you're limited to the changes you make to the home, any structural changes would need approval from the housing provider before it went ahead
- if you build up to owning 80% or more of the house, you'll need to pay stamp duty on the whole thing
- shared ownership doesn't allow for freehold, they will always be leasehold. Once you own 100% you may have the option to switch to freehold though
- even if you only own 25% of the property, you'd still need to pay the whole ground rent and service charge