Shared ownership schemes have become really popular in recent years, because they have been designed to allow people who might not have the funds for a traditional mortgage to get a foot on the property ladder.
This is a fantastic opportunity because, as deposits get increasingly high, it means that any potential purchaser only needs to raise a deposit on the share that they are buying. So, for instance, if the property was valued at £100,000 and you were buying half of it, at £50,000, then a 10% deposit would be £5,000, rather than £10,000 if it was not a shared ownership.
The percentage of the property that you buy need not be 50%; options range from buying 25% to 75% of the property, meaning that there is something to suit every pocket.
Buyers only need a mortgage for the percentage that you are buying: in the above example, 50%. The other 50% would be paid through rent to the housing association, who own the rest, but this rent is subsidised so that it is affordable. You can staircase the amount you own, over time, usually in increments of 10%.
The scheme is designed to be inclusive, and therefore you can earn a reasonable household income and still be eligible. Outside London, the threshold is £60,000 per household, and inside London it is 64,300 for 1-2 bedroom properties, and £77,200 for 3-4 bedroom properties. You do not need to be a key worker for these schemes, either. Don’t be mistaken into thinking these properties are only the ones that nobody wants to buy: this is absolutely not the case, because often newer developments are included in this scheme. You would be still responsible for any other costs, such as ground rents and service charges, if applicable.
This scheme is particularly attractive for first time buyers, many of who have had to rent properties as they cannot afford to buy, and therefore do not have enough money to save for a deposit to get a conventional mortgage.
There is also good news regarding stamp duty. You have two options with this: the first is that you can make a one-off payment. This gives the most flexibility, because it means that any stamp duty on your share of the purchase is payable, but the rest is only due when you own over 80% of the property. This is likely to be more applicable, as buying a percentage of the property is likely to keep it under the stamp duty threshold of £250,000.
The other option is to stamp duty in instalments, based on how much of the property that you own. This is tempting, to save a large payment if applicable, but could actually work out costly. If you are a first time buyer, and chose to pay in stages, the higher threshold of £250,000 does not apply. Instead, the first £100,000 that you buy incurs a stamp duty of 1%, although nothing else is due until you own 80% of the property. This is why it is important to get professional advice, to find the best option for you.
Ascot Mortgages can help you with this, as market leading mortgage brokers. We can find you the best option for your situation, meaning that you do not need to worry about potentially making the wrong choice. We can also help direct you to the lenders who will lend for shared mortgages, as not all lenders will, although the market is growing as they become more popular. We can save you the time and stress of going to each lender to see if they lend to shared-ownership properties. Whatever your situation, Ascot Mortgages can help!