If you are in a position where you are unable to get on the housing ladder, the Government’s Help to Buy: Shared Ownership scheme could help. Shared Ownership is the longest established affordable home ownership product. It gives you the chance to buy a share of a property whilst paying rent on the remaining share.
To purchase a Shared Ownership home in England you need to be either a first-time purchaser, an existing shared owner looking to move, or you previously owned a home but cannot afford to buy one now.
To qualify for the Shared Ownership scheme, you will need to apply via the Housing Association (HA) or council or local Help to Buy agent running the scheme in the area you want to live. This application process will include a criteria assessment which covers financial and current living arrangements. Once completed and approved you will be able to reserve a shared ownership property.
With Shared Ownership, you can buy between 25% and 75% of a new build property, depending on what you can afford based on savings and mortgage. You can also buy a pre-owned shared ownership property from someone living in a shared ownership property, this is known as a resale, in this case you would buy the share the person currently owns or more if you can afford to do so.
To be eligible for shared ownership applicants must have a household income of less than £80,000, or £90,000 in London and be otherwise unable to purchase a property suitable to meet their housing needs on the open market. You need to have a good credit history, not own a property, or part of a property, at the time of completing on your purchase and have a deposit to be able to secure a mortgage and to cover buying costs. Some Ministry of Defence personnel will be prioritised for shared ownership schemes but there are lots of properties offered under shared ownership.
At a later stage, if you want you can purchase additional shares known as Staircasing.
Buying a Shared Ownership Property
Once you have been assessed and approved as eligible to buy a shared ownership property you can start your search for your perfect home. Once you have found a property you like, you will be able to complete and expression of interest on your preferred property. The Housing Association / Local Authority will then assess your application against your eligibility and need and the criteria they are required to abide by within the planning application for the development.
Once successful, you will complete a reservation form and pay a reservation fee.
After agreeing a purchase, you will be provided with a list of suggested conveyancers. From this list, you will be asked to appoint a conveyancer that will then represent you which you must do within a few days.
The Housing Association will send a Memorandum of Sale to your chosen conveyancer and their own conveyancer, which will begin the process of purchasing your Shared Ownership property.
You must also contact a Mortgage Broker to arrange your mortgage. The Memorandum of Sale will require you to exchange contracts within 28 days. If you fail to achieve this the property may be remarketed. At exchange of contracts your solicitor will be agreeing a completion date if you are buying a pre-owned property or on a new build still being built, you will exchange with completion ‘on notice’, which means the purchase process will take longer to complete. Once the property has been completed, notice will be served by the Housing Association’s conveyancer to us and completion of your home purchase will take place within approximately 5-10 working days.
Shared Ownership Lease
Regardless of whether you purchase a house or a flat, Shared Ownership homes will have a lease. The lease is a standard Government Homes and Communities Agency (HCA) lease.
The lease is a legally binding contract between you, the leaseholder, and the Landlord (often the Housing Association). As with most residential leases, the lease covers the rights and responsibilities of the Landlord, you the leaseholder, what you can and can’t do. With a shared ownership lease it will also cover how your rent is reviewed, how to staircase and how to sell. The lease will also contain items specific to your scheme which will vary from scheme to scheme.
Buying any property, if you fail to keep up the repayments on your mortgage, your Lender will have required the Landlord to enter into an agreement of undertaking prior to completion. This agreement means that your mortgage lender, can in the event of you defaulting on your mortgage, and they wish to repossess and sell the property have the right to do so and both you and the Landlord will usually lose out financially.
Stamp Duty Land Tax (SDLT)
You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland. The Tax is different if the Property or Land is in Scotland or Wales. The current SDLT threshold is £125,000 for residential properties.
There are different rules if you’re buying your first home. You get a discount (Relief) which means you pay less or no tax if: You complete on or after 22 November 2017; the purchase price is £500,000.00 or less; you and anyone else you’re buying with, are first-time buyers. To find out more about how much you pay visit: www.gov.uk/stamp-duty-land-tax
You pay the tax when you:
* buy a freehold property
* buy a new or existing leasehold
* buy a property through a shared ownership scheme
* transferred land or property in exchange for payment, eg you take on a mortgage or buy a share in a house
Shared Ownership homes, like most others, generally incur Stamp Duty Land Tax. However there are two options available:
1. Make a one-off payment based on the total market value of the property.
2. Pay any Stamp Duty Land Tax due in stages.
When paying in stages you will make a payment based on your initial share plus five year’s rent. If you purchase further shares through staircasing, you will only need to pay Stamp Duty charges again after you have purchased 80% of the property.
However, if you are a first-time buyer you can claim relief from Stamp Duty Land Tax, but only if you pay based on the total market value of the property.
You must send an SDLT return to HMRC and pay the tax within 30 days of completion. We will file your return and pay the tax on your behalf on the day of completion and add the amount of our fees. We can talk you through the best options for you when you purchase your Shared Ownership home.
As a Shared Ownership leaseholder, you will own a share in your property, for the share you don’t own, you will need to pay rent. The rent in the first year of a new build property will be up to 3% and will be confirmed on the Memorandum of Sale. For a pre-owned property the current rent in that financial year will be stated if you are buying the same share as the current owner or a reduced amount based on additional share you buy more than what the current owner had.
Your lease will the confirm the rent reviews which will take place periodically, usually every April and will increase in line with the Retail Price Index.
The rent is reviewed on an upwards only basis, which means it will not go down when reviewed. Your Shared Ownership lease will provide an example of how this works.