Shared ownership was introduced to give lower-income families and key the opportunity to get on the housing ladder.
Shared ownership, ie: initially owning between 25 and 75 per cent of your home, can open the door to home ownership but depending on your stake and whether or not you intend to increase it, higher valuations, mortgage fees and legal costs can mount up.
The cost of an average home in London is £468,845 (Lloyds Bank), double that of the UK as a whole, making the 10 per cent deposit required an impossibility. This is where shared ownership comes in.
Under the umbrella term “affordable housing”, shared ownership lets you buy between 25 and 75 per cent of your chosen property requiring a much smaller deposit.
In addition to a lower mortgage, the part-property owner will pay rent on the remaining share, typically at a lower rate than on the open market.
Key workers and military personnel are generally prioritised for shared ownership, but the main qualifying criteria is that the buyer does not own a property already and the household income is less than £90,000 (London).
Once on the ladder, the aim is to increase your share in your home and reduce the amount of rent. The term for this is “staircasing”.
“Two thirds of our shared ownership population have grown their stake over time to 100 per cent,” says Olivia Moss, of L&Q charitable housing association.
HomeOwners Alliance advice service chief Paula Higginson says shared ownership is ideal if you plan to staircase to 100 per cent but warns: “Increasing your share in the property can be costly when you consider valuation and mortgage fees and legal costs.”
When a buyer wants to increase their stake, the property is revalued and in a rising market this means the new share will be more expensive than the last.
When it’s time to sell, the housing association has the right to try to find a buyer before the home is sold on the open market. “There will also be maintenance charges to pay,” Higginson adds.