Shared ownership is a government-aided initiative to help first-time homebuyers and existing homeowners purchase a new property by helping towards the deposit. This scheme aims to help buyers who cannot afford the mortgage on 100 percent of an existing or new-build home, and is available to people with an income of less than £80,000.
Through shared ownership, you may be able to overcome the problem of high deposits and acquire a home that might be out of reach under other forms of financing.
Key changes to shared ownership
From April 2021, shared ownership will become even more affordable. These are the key changes to the scheme which the Ministry of Housing, Communities and Local Government released and will operate in 2021 under the Government’s new Affordable Homes Programme. The changes include:
- Fees for buying additional shares will be reduced
- Landlords will pay the costs of repairs and maintenance for the first 10 years of ownership
- You must be a first-time buyer with an annual household income of less than £80,000 (£90,000 in London)
- The minimum additional share will be reduced from 25 to 10 percent
- Homeowners can purchase additional shares in 1 percent instalments, down from 5 or 10 percent
- The rules on selling the property will change
Easier to increase your share, plus smaller first stakes
The minimum share reduction represents a helpful change to shared ownership, and makes entry into the initiative easier if you’ve been struggling to get together enough for your deposit.
Getting together the finance for a home valued at £120,000, for example, means you will only have to find £12,000 rather than £30,000. You will also be able to pay a subsidised rent to the owners of the property as well as annual ground rent and service charges as your home will be a leasehold property.
If you want to increase your ownership of the property gradually, you can buy additional shares of just 1 percent at a time. This process is known as ‘staircasing.’ Using the example of the £120,000 property, you could pay as little as £1,200 for an additional 1 percent share, rather than £6,000 or £12,000 for 5 or 10 percent under the current rules. This allows you to gradually build up ownership in a more affordable manner.
You will also need to pay a deposit (usually at least 5%) on your share and then get a mortgage to cover the rest.
It’s worth remembering that the amount you pay for the additional share may change, as it will be based on the value of the property at the time you make the increase, not the original price. Also, due to the current Covid-19 pandemic there may be less lenders willing to accept lower shares due to the current economic climate, but there are still some who will, so don’t let this discourage you.
If you’re a first-time homebuyer, the details and technicalities of owning your own home can be overwhelming.
At Clever Mortgages we make things simple, easy and straightforward. Not only do we have years of experience in helping first-time buyers get on the property ladder, we’ve also got a team of experts who can help you with every step of the home-buying process – including the shared ownership process.
What’s more, we’ve got an array of options if you’ve got poor or bad credit, with the Help to Buy scheme often proving a fantastic option to help people with bad credit scores buy their first home.
If you’re ready to become a homeowner, give us a call today on 0800 197 0504 or visit our website to arrange a callback at a time that suits you.