In order to help first-time buyers get onto the property ladder, the government offer a number of schemes. This article is the next in our series about the help that is available for first-time buyers. Following our articles on LISAs and the Right-to-Buy scheme, this article is about the Shared Ownership scheme.
What is a first-time buyer?
As a reminder, for the purposes of the Shared Ownership scheme, a first-time buyer has never owned a property anywhere in the world. As well as homes you have purchased, inherited property will make you ineligible. This is the case if the inheritance was a shared or complete ownership, and even if the property was sold immediately.
Shared Ownership scheme
The Shared Ownership scheme allows you to buy a share of a home rather than the full value. It’s ideal for those who cannot afford a full deposit and mortgage payments on a home suitable for your requirements. A share of between 10% and 75% may be purchased, though sold shares often start at 25% of the home’s full market value. The buyer pays rent to the landlord of the share not owned by them.
Who is eligible for the Shared Ownership Scheme?
This scheme is not limited to first-time buyers. There are, however, some eligibility criteria.
Both of the below statements should be true:
- Your combined household income should be less than £80,000.
- You would not be able to afford the deposit and mortgage payments for a property that is suitable for you requirements.
Additionally, one of the below statements must be true:
- You are a first-time buyer.
- A new household is being formed, for example after a relationship breakdown.
- Your current home was purchased through the Shared Ownership scheme and you wish to move home.
- You used to own a home but are now unable to afford to purchase.
Full eligibility criteria can be found on the government website*.
What type of home may be purchased with the Shared Ownership scheme?
Purchases through this scheme may be for some new build properties, or existing properties on the scheme. If you have special housing requirements, for example a long-term disability requiring a ground-floor flat, this may be accommodated on the scheme. Some properties may be offered by housing associations or local councils.
Can I take a mortgage out to buy the shares?
Yes. The property share may either be purchased with a mortgage or using savings. Usually, a deposit of 5-10% of the share value being purchased is required to take out a mortgage. When considering affordability, remember that additional to mortgage payments, rent will be due to your landlord for their share value.
How much rent will I pay?
The rent due to your landlord will depend on the share of the property they retain. Rent is limited to 3% of the value of the shares retained by the landlord. This figure is often around 2.75%. Additional fees may be applicable, including service charges.
Can I buy further shares in the future?
Should finances allow, you may be able to buy additional shares from your landlord in the future. This is known as staircasing. The greater the percentage of shares owned, the lower the rent that will be due each month.
What happens if I wish to sell my property purchased through the Shared Ownership scheme?
This depends on the percentage of your property that you own at the time you wish to sell. If, through staircasing, you own 100% of the property, you can sell through an estate agent on the open market. Otherwise, you’ll need to inform your landlord that you wish to sell your share. They will have a ‘nomination period’ in which they can find a buyer for your shares. This nomination period could be 4, 8 or 12 weeks and will be detailed in your lease. After this time you’ll be able to sell on the open market.
How can Bell Mortgage Solutions help?
The Bell Mortgage Solutions team are on-hand to help you get on the property ladder. We’ll give you an understanding of the house values that you should be looking at, following an affordability assessment. Your eligibility for first-time-buyers help will be assessed. However even if this is not an option for you, we’ll help you find the right mortgage for your needs. Contact us to find out more.
Please note: Your home may be repossessed if you do not keep up repayments on your mortgage.
*Please be aware that by clicking onto the above link you are leaving the Bell Mortgage Solutions website. Please note that neither Bell Mortgage Solutions nor PRIMIS are responsible for the accuracy of the information contained within the linked site accessible from this page.
The information contained within was correct at the time of publication but is subject to change.
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