A Guide to the Shared Ownership Scheme
Buying a home is a big decision and one that requires a large investment. If you’re struggling to get onto the property ladder due to all the associated costs, a scheme such as shared homeownership could help make owning your dream home a reality.
From how the shared ownership scheme works, to buying your perfect new home with Keepmoat Homes using Home Reach, here we’re answering all your shared ownership FAQs.
What is the shared ownership scheme?
The shared ownership scheme lowers the cost of buying a new property, making it easier for first-time buyers to get onto the property ladder. Shared home ownership works through a housing association; you buy into a share of your home, usually between 25% and 75%, and then pay rent on the remaining amount.
With the shared ownership scheme, you are part buying and part renting a leasehold home. This means your lease gives you the right to occupy the home for a much longer period than with traditional renting. Usually, the lease on a leasehold ownership property is 99 or 125 years, but this doesn’t mean you’re tied to the home for this extended period – the home can still be bought or sold during this time. This gives you the freedom to sell and move if needed, but the additional assurance of owning part of your home and maintaining the rights to live there over a prolonged period. With shared ownership, you still need a mortgage to purchase a share, however, as you’re not paying towards the full cost of the house, the amount of money you need for your deposit will be a lot lower.
What are the advantages and disadvantages of shared ownership?
Shared ownership is a great route onto the property ladder for those who can’t afford to buy a property outright. However, as with any scheme, there are a number of things to consider when deciding whether it is the right option for you.
The benefits of shared home ownership
- As the home deposit is taken as a percentage of the share price, you can purchase a home with a smaller deposit.
- As you’re only buying a share of the property, your mortgage costs will be smaller.
- The rent payments you make on the property are lower than renting privately.
- You can sell your share of the property at any time.
- You can buy more shares of the property after the initial agreement, usually up to 100%, allowing you to own the property outright.
The disadvantages of shared home ownership
- Shared ownership homes are always leasehold. This means ground rent and service charges may apply for the property, and you are responsible for paying these no matter the size of your share.
- As you don’t own the home outright, there may be more restrictions on alterations you can make to the property.
- If you only own a small share of the home, you will not benefit greatly from the property increasing in value.
- If you want to buy an additional share of the property following your initial agreement, this is based on the property value at the time of the additional purchase. This means the share price will increase as property prices in your area increase.
- Selling your shared ownership home can sometimes be a little more complicated. We’ve detailed what you need to know about selling a shared ownership property below.
Can you buy out your shared ownership home?
Once you’re the owner of the home, you can buy more shares. This process is known as ‘staircasing’. The cost of the new share you are purchasing depends on the value of your home at the time you want to purchase, meaning it could be higher or lower than your initial share depending on whether property prices in your area have risen or fallen.
Most shared ownership properties allow you to buy additional shares up to 100% of the value of the home, at which point you will own the home outright. If you buy out all the shares you will no longer pay any rent on the property. Instead, your costs will be the standard cost of the mortgage as well as any service charges or ground rent, if applicable to the property.
What if I want to sell my shared ownership home?
If you do wish to sell your shared ownership home, you have obligations to the landlord or housing association as they also own a share of the home. Most leases specify that the leaseholder must give a right of first refusal to the housing association or landlord if they want to sell the home. This gives them the right to buy the home first, or the right to find a buyer for your home themselves within the nomination period. These procedures are in place to ensure the property remains available for people looking for affordable housing.
Of course, if you have bought more shares through the staircasing process and own 100% of your home, you can sell it yourself in the usual way.
Keepmoat and the shared ownership scheme
At Keepmoat Homes we have partnered with heylo Housing to offer Home Reach, a government-backed shared ownership scheme designed to help more people buy their own home.
Why Home Reach?
With Home Reach, you buy a share of your chosen home and pay a low monthly rent on the part you don't buy. You get to choose whether you buy a bigger share of a cheaper home or a smaller share of a more expensive home.
You can initially purchase up to 75%* of your chosen home and heylo will become your landlord, granting you a 125-year lease. This means you will be able to live in your home as if you've bought it outright. You can buy more of your home in the future and stop paying rent on that part.
• An affordable way to get onto the housing ladder
• Provides security of homeownership
• Freedom to decorate and improve your home
• Ability to increase the level of ownership at any time
• Flexibility to sell and move at any time
• Benefit from any increase in property prices
How does shared ownership compare against renting or buying?
The examples below are based on a £230,000 home.
* Source heylo: Part buy-part rent based on a 50% share. All figures based on a £230,000 home. Estimated monthly cost is an illustrated figure only, please speak to an Independent Financial Advisor for exact costings. Additional costs such as building insurance, monthly management fee and estate charge are not included in the monthly rent figure or in the estimated monthly cost. Rent is charged at 2.75% of the unsold share value. This increases annually with RPI + 0.5%. Starting shares vary across sites and plots. For more information visit your local Home Reach development. **Assuming rental yield 4.5% per annum.
Eligibility for shared home ownership
- You are eligible to purchase a part rent, part buy property in England or Wales if:
- Your household income does not exceed £80,000 per annum for homes outside of London (£90,000 in London)
- You have a deposit (at least 5% of the share value)
- You are a first-time buyer or used to own a home, but cannot afford to buy outright now
- The shared ownership property will be your principle and only home
- You have passed a Homes England Affordability calculator, demonstrating you are financially able to purchase the share value and support the monthly costs
- You have registered with a Help to Buy Agent
Getting started with your shared ownership Keepmoat home
If you’re struggling to get onto the property ladder and don’t have a big deposit, a scheme such as shared homeownership could help make owning your dream home a reality. We have a range of Home Reach homes for sale across our developments. Speak to your Sales Executive for availability.
*Home Reach is available on selected Keepmoat Homes plots and starting shares vary. Affordability and eligibility criteria's apply.
For more information about heylo's Home Reach please visit www.homereach.org.uk or speak to your Sales Executive.
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*Starting shares vary across sites, please visit the sales office on site.