How do shared ownership schemes work?

Getting onto the housing ladder isn’t easy. House prices continue to rise, and with wage growth relatively stagnant for some time, that makes purchasing a first home all the more difficult.

There are a number of schemes designed to give first-time buyers a helping hand in getting a home of their own though.

One of these which is worth considering is shared ownership.

As the name suggests, you share ownership of a property, usually with your local housing association.

In practice, you buy a stake in the property. This may be as little as 25% or as much as 75%.

You’ll still need to put down a deposit, and usually you’ll use a mortgage to purchase your share of the property, so in that respect it works in much the same way as a traditional house purchase.

While not all lenders will offer shared ownership deals, there are plenty of big and small names that will, so you’ll have a fair bit of choice.

Where things differ is that you will have to pay rent on the share of the property that you don’t own to the organisation that shares ownership with you.

Essentially, you are both buying and renting at the same time, though this can work out substantially more affordable than trying to buy on your own.

It’s important to note that the different countries within the UK each operate their own version of shared ownership, and as a result the eligibility criteria will vary depending on where you’re hoping to buy.

There can even be variances within the same country. In England you need to have a household income of less than £80,000 in order to qualify for the shared ownership scheme, unless you are looking to buy in the capital, in which case you can earn up to £90,000 a year between you.

If you are interested in buying on a shared ownership basis, then looking for a property is not really much different to if you’re buying outright - you can head straight to the usual property portals like Zoopla and Rightmove to begin your search, which have plenty of shared ownership homes on there.

There are specialist shared ownership property portals too, like Share to Buy.

However, a quicker route will be to contact your local housing authority, as they will usually maintain a list of which homes are available on a shared ownership basis in your area.

Just because you initially buy a 25% stake, that doesn’t mean that you are stuck only owning a quarter of the property. All shared ownership buyers have the opportunity to increase the size of their stake, which is called staircasing.

You’ll need to arrange a valuation, which will establish how much the extra stake in the property will cost, and may need to sort out a new mortgage in order to cover the additional stake.

The plus point to increasing your stake is that you will both reduce the amount of rent you need to pay each month while also ensuring that you enjoy a larger proportion of the sale price when the time comes to move on.

Before you rush off to snap up a shared ownership property, it’s really important to note that when the time comes to sell, the process is far more complicated than with a property which you own outright.

Often the organisation that you co-own the property will will have first refusal, so you will have to give them the chance to attempt to sell your share to a new buyer. Your co-owner will take over the sale for a specified period in order to try to find a buyer. This can go on for a couple of months, too.

If they are unsuccessful, then you can take over and try to sell it yourself on the open market. Bear in mind that it’s not enough to simply find an interested buyer - they will need to meet the eligibility criteria in place from the housing association or organisation that owns the rest of the property.

Perhaps unsurprisingly, given the more complex nature of this form of property ownership, the legal fees that you’ll have to pay here are going to be more considerable than when you own the property outright.