Could shared ownership help you get on the housing ladder?

First time buyers of shared ownership homes were given a boost on October 29th in the UK budget. It was announced that, on homes costing up to £500,000, they will be exempted from stamp duty.

Stamp duty is a tax people pay when they buy a house. The cost depends on the value of the property. Last year, first time buyers were given some relief from this tax, but many shared owners were not able to take advantage. Now they will be able to.

So, what is shared ownership, and could it help you take the first step onto the housing ladder?

What is shared ownership?

Shared ownership is part of Help to Buy, a set of government schemes to make buying a home more affordable. It allows people to buy part of a house - between 25% to 75% - and pay a mortgage on that portion while paying rent on the rest. Over time you can buy more of the home until you own it all.

It’s important to remember, you’re not sharing the home with a friend. The ownership is shared between you and the housing association you’re buying it from.

How does this help me?

Shared ownership could help you get on the property ladder quicker. If you’re struggling with the financial burden of buying a full property, this scheme could help. The deposit can be as low as 5%, and as you’re applying for a smaller mortgage amount, to cover the share of the home you’re purchasing rather than the full property, this will lead to reduced costs.

Do I qualify?

Currently, you need to earn less than £80,000 a year if you live outside of London, and £90,000 if you live in the capital, to be eligible for shared ownership. You also need to be a first-time buyer or someone who has owned a house before but can’t afford to buy now. You cannot plan to rent out the house and must have the permanent right to live in the UK.

How do I apply for shared ownership?

To buy a home through this scheme, you can get started by contacting the Help to Buy agent in the area you want to live.

What happens if I want to sell

When it comes to selling the home, once you own 100% of it, you can sell it yourself. But the housing association you bought it from has ‘first refusal’ – the right to purchase it before anyone else – for 21 years. If you don’t own the full property, the housing association can find its own buyer.

Are there any drawbacks?

If property prices go up and you decide you want to buy more of the property, you will pay more, it won’t be the same rate you paid on the first part of the property. But it goes both ways – if property prices go down, you’ll pay less.

Also, as you do not completely own the home until you’ve bought 100% of it, remember you may need to get permission from the housing association you’re sharing it with before getting the decorators in.