Like the sound of Shared Ownership, but not sure how it works? Katie Bond, director of housing association Notting Hill Home Ownership (NHHO), is here to set the record straight for Shared Ownership Week (5-11 October).
What is a Shared Ownership scheme and who is it meant to help?
Shared Ownership is where you buy a percentage of the property and pay a subsidised rent on the part you do not own. It can help anyone who is unable to buy on the open market; however, it is usually targeted at first-time buyers.
How does it work?
We will sell you a share between 25 per cent and 75 per cent, depending on what you can afford. You will also pay rent on the share that you haven’t purchased, as well as the service charge for the whole property. Even through you only own a share of the property, you occupy the whole property as a leaseholder and can buy additional shares (called staircasing) at any point in the future or you can sell the share you own if you want to move.
How is it different from a Help to Buy scheme?
Help to Buy is a mortgage guarantee scheme that helps you buy a home with a deposit of 5 per cent of the purchase price. It’s open to both first-time buyers and home movers for new-build and older homes in the UK with a purchase price up to £600,000. The main differences is that, with Help to Buy, you own the whole property, but you have to be able to raise a mortgage on the full value of the home, rather than just on the share you buy, as is the case with Shared Ownership.
How will my monthly payments be divided between mortgage and rent?
It depends on the size of the share you buy. The mortgage rate will be set by the lender and you will pay this on the share that you have purchased minus whatever deposit you have paid. The annual rent will normally be 2.75 per cent of the share you haven’t purchased. For example, on a £300,000 property, if you purchased a 40 per cent share with a 10 per cent deposit you could expect to pay the following on a monthly basis:
Mortgage – £638 (based on a 4.99 per cent mortgage rate)
Rent – £413
Service charge – £113
Total – £1,164
How could a Shared Ownership scheme benefit a first-time buyer saving for a deposit?
One of the key benefits of Shared Ownership through NHHO is that you only have to pay a deposit on the share you are purchasing. So, if you are buying a property that is £300,000, you would normally need to save at least 10 per cent, which would be £30,000. With Shared Ownership, you could buy a 25 per cent share so you would only need a deposit of £7,500.
Who is responsible for repairs, maintenance and buildings insurance?
You are a leaseholder so you are responsible for all the repairs inside your property. In our case, NHHO will be responsible for carrying out any repairs in communal areas such as lifts and these are paid for through the service charge. The housing association will also take out buildings insurance, which you will pay for through the service charge; however, you must take out your own contents insurance policy.
What options do I have if my income increases?
The great thing about Shared Ownership is that you can buy additional shares of your property at any point. So, if you originally bought 40 per cent, but a few years later got a pay rise, you could buy additional shares from 10 per cent to 60 per cent, which would mean you own the whole property. As you buy more shares your rent goes down, too.
What if I want to move?
If you want to move you will need to let your housing association know. It will normally have the option to sell your share so that the property remains as Shared Ownership and helps somebody else on to the property ladder. If after 12 weeks (usually), the housing association has not been able to find a buyer, they will give you permission to sell the property on the open market.
What other outlays should I consider?
As with all home purchases, you will need to pay legal fees and stamp duty, depending on the value of the home. There are options to pay stamp duty in stages so you should speak to your housing association to see what your options are.
To find out more, visit sharedownershipweek.co.uk
Dispelling Shared Ownership Myths
The house-buying process is complicated enough, without having to understand percentage shares and eligibility criteria, right? Well, housing association L&Q has been making shareable content for social media to educate the masses about Shared Ownership in a bite-size, pain-free way.
The first video of its Myth Busting series – “What is Shared Ownership?” – has gathered over 240,000 hits on YouTube and others, dispelling notions such as “Shared Ownership isn’t for people like me” and “I’ll never be able to afford a mortgage deposit”, are also gaining in popularity.
“We decided about 18 months ago that video was becoming the most popular medium for engaging consumers,” says Olivia Scrimshaw, marketing director at L&Q. “With Shared Ownership, it’s the case that we have to educate people about it first and then sell second, which is very different to selling on the open market. We have to take people through the process so we can manage their expectations, find them a suitable property and make sure they fully understand the process.”
Her department is constantly on the lookout for buyers who have interesting stories to tell, a point of difference or simply “come across well on camera.” Then stories are edited together to dispel prejudices about the scheme, like buyers thinking they’ll have to move out of London to buy a home.
“Social media is an ever-growing part of that strategy,” says Scrimshaw. “For instance, we did a round table of bloggers yesterday who tweeted the whole thing to direct traffic to our websites. It’s just the easiest way to share content that will engage potential buyers en masse.”
To watch the series, visit L&Q's website.