Shared ownership has been around for a number of years and has a proven track record. Often called part-buy/part-rent, the scheme allows for shares of between 25%-75% to be purchased in a property and a subsidised rent to be paid on the balance.
The precise share purchased depends on an individual’s level of affordability and the ability to raise a suitable mortgage. Under this heading, the scheme refers to specific new build properties available through housing associations.
The subsidised rent is initially capped at a maximum of 3% and is calculated on the share of the property retained by the housing association.
For example on a property valued at £150,000 bought on a 50% share the initial rent would be: £75,000 x 3% = £2,250 per annum, paid monthly at £187.50.
Additional shares may be purchased in future years and will be assessed on the property’s value at the time of application. This process is known as staircasing. You can staircase until the property is eventually owned outright.
Each time a staircasing event takes place, the amount of rent is recalculated and reduces proportionately. It should be noted that there is no compulsion to buy further shares and the original share split can remain in place until the property is eventually resold.
Mortgages (subject to market conditions) are generally available for up to 95% of the share being purchased.
On the above example, therefore, the minimum personal deposit requirement could be as low as £3,750, although if a 25% share were purchased, this would reduce to £1,875.
If you wish to sell your home at a future date, the property is marketed for sale by the housing association and resold at the market value.
Care should be taken when looking at shared ownership properties in specific rural areas as different rules may apply and checks should be made with the relevant housing association.