What are the benefits of shared ownership?

What is shared ownership?

Shared ownership is becoming an increasingly favourable choice for many, particularly first-time buyers wanting to get on the property ladder. The principle behind purchasing a shared ownership property is that instead of buying the entire home outright, you purchase a share (usually between 25-75%). A recognised Housing Association will own the remainder of the share in the property, and you will then pay that Housing Association rent at a subsidised rate. You will pay mortgage repayments on the share you own and rent on the share you don’t. 

Advantages and disadvantages

Shared ownership gives you the advantage of greater certainty, allowing you to invest and work towards full ownership without overstretching yourself. There is the opportunity to purchase further shares in the property, giving you time and flexibility to save whilst living at the property. It is an excellent option for those needing more time to purchase a property. This process is called Staircasing, but acquiring more shares can be expensive, and if the value of the property increases, so does the share cost.

It is important to note that you will still be required to pay the usual associated costs, such as any service charge payable and general maintenance or costs for repair work. Even though you will be paying rent, unlike a tenant, you will have to cover the costs of repairs and maintenance to your home in full. When it comes to the point of selling, it may be more challenging to sell a shared ownership property if it is located in an area where this purchasing option isn’t popular. However, the housing association may be willing to buy your share, resulting in a faster sale for some.

The conveyancing process involves the usual searches, raising enquiries, exchange and completion. The benefit is that the deposit is much smaller on a Shared Ownership property as it is based on the share price. Still, the costs for surveying, conveyancing and removal arrangements will remain the same as purchasing an entire property upfront. Stamp Duty (SDLT) may also be payable, and there are two ways to pay this:

1. As a one-off payment based on the total market value of the property
2. Pay any SDLT due in stages.

If you decide to make the one-off payment, this is making a ‘market value election’ for SDLT, and you won’t have to pay any additional stamp duty when Staircasing. If you decide to pay in stages, the initial payment will be less, but you may have to make further payments if you increase your share of the property in the future.

It is crucial to carefully consider and research all the governmental housing schemes before proceeding with shared ownership. Overall, it is a great way to get onto the housing ladder for a smaller initial outlay, allowing you to budget for the future and plan ahead. 

Contact SO Legal today.

We offer conveyancing services as well as expert property advice. We have offices in London, Brighton, Eastbourne, Hastings, Uckfield, and Ulverston, and assist homebuyers across the country.