Learn more about the Housing Association scheme: Shared Ownership
Buying a home is extremely tough in this day and age, especially for young people. Personally, I would like to buy my house mortgage free but this isn’t always possible, and it’s good to know your options.
The government is aware of the unrealistic measures young people face when buying a property, therefore, they have put schemes in place to help those who may not necessarily be able to afford to buy a house in the open market. If you are looking to buy a house now, you may come across schemes like ‘share to buy’, ‘shared ownership’, ‘rent to buy’, ‘help to buy’ more frequently. Yeah, confusing I know. I will do my best to break this down for you starting with Shared Ownership. These schemes have existed for years but are becoming popular due to a more lenient eligibility criteria.
Shared ownership also known as ‘share to buy‘ or ‘part buy part rent’ is a government led scheme whereby a low income earner buys a 25%-75% share of a property, while paying rent on the rest, which is owned by a housing association. Therefore, yourself and the housing association both have ownership of the property, hence the name.
There are a number of restrictions you need to consider before going this route. According to some, it’s a cheaper alternative to renting but you are only eligible if you earn or your household income is less than £90,000 a year (in London, lower for other areas). Usually, you should be a first time buyer and may also have to live and work in the same borough as the development you intend to buy.
Now the fun part, there are extra charges aside from your rent, like service charge, which is usually paid monthly. So technically, you’re fully responsible for the maintenance of a property that isn’t entirely yours. Most properties available in this scheme are 1-3 bedroom new build apartments or houses, making it an unsuitable option for larger families.
Bear in mind that you cannot purchase any properties in the open market and are only restricted to properties owned by housing associations involved in this scheme. There are websites that advertise exclusively shared ownership properties and provide substantial information to guide you before purchasing. These include Southern Home Ownership, Share to buy and FIRST STEPS.
I would recommend this option if you actually intend on buying the whole property, as it provides an avenue to possibly invest the money you would have used to purchase the property outright in other things and have a bigger return on it. I would also recommend that you buy a higher share of the property. This way, you will feel like you are actually investing in your own home and will also end up paying less on the rent.
You also have the opportunity to purchase the rest of the share owned by the housing association, which is referred to as ‘staircasing‘. If you choose to do this, a property valuation has to be carried out and then you pay for the remaining share based on the current market value of your home. This pretty much covers it and you can find detailed information in the websites mentioned above.
In following posts, you can find more information about the other schemes.