Help to Buy initiatives, including the Equity Loan and Mortgage Guarantee schemes, have helped thousands of homebuyers to purchase property in the past couple of years, while the forthcoming Help to Buy ISA will boost property buyers’ deposit savings by paying a tax-free bonus.
While Help to Buy is fairly new, shared ownership schemes have been around in one form of another for years. Although they’re not strictly part of the Help to Buy initiative, the government does include them among its wider package of “affordable home ownership schemes”, and these days shared ownership purchases are arranged through local Help to Buy agents.
What is shared ownership?
Provided by local housing associations, shared ownership is a scheme whereby you effectively purchase a percentage of the property – between 25 and 75 per cent – and the remainder is owned by the housing association. You pay a mortgage on the part of the property that you own, and a proportional rent to the housing association for the part that they own.
Shared ownership is available to first time buyers, and buyers who used to own a home but cannot currently afford to buy a property. People who are currently renting a housing association or council property receive priority for shared ownership purchases, as do Armed Forces personnel.
If you are looking to buy a one- or two-bedroom shared ownership home in London, your household income must be less than £71,000 – or £85,000 if buying a London property with three or more bedrooms. If you are buying outside of London, the scheme is open to households with an annual income under £60,000.
After you have entered into a shared ownership purchase, you can buy further shares in your home at any time, up to 100 per cent ownership. However, remember that the cost of new percentage shares will be based on the property value at the time, which may be more or less than when you bought your first share. The housing association will arrange for the property to be valued, but you will have to pay for this.
Special shared ownership schemes
Certain groups of people have access to shared ownership schemes with preferential conditions. For people aged over 55, the Older People’s Shared Ownership (OPSO) scheme allows you to buy a percentage of your home between 25 per cent and a maximum of 75 per cent. As with other shared ownership you pay proportional rent on the remainder. The greater the ownership share the less rent you have to pay, and once you own 75 per cent you no longer have to pay rent.
People with a disability can also buy a shared ownership property under the Home Ownership for People with Long-term Disabilities (HOLD) scheme. This scheme is particularly helpful for those who may have special housing needs due to their disability – for example needing a property on the ground floor – as it allows homes on the open market to bought on a shared ownership basis if there are no suitable properties available from the housing association.