Shared Ownership Mortgage

What is shared ownership?

Shared ownership was introduced to help people who cannot afford to buy a home outright. Through shared ownership you buy a share of the property and pay a rent on the remaining share you do not own. Gradually you may buy further shares and eventually own your home outright.

Who can buy through the shared ownership scheme?

The scheme is intended for people who cannot afford to buy a suitable home in any other way. They must be in housing need and be unable to afford outright purchase. Priority will normally be given to existing public sector tenants or those on local authority or social landlords’ waiting lists.

Although you have not bought the property outright, you will have the normal rights and responsibilities of a full owner-occupier. You are advised to ask your legal adviser as well as the social landlord if there are terms you do not understand.

Can I buy a shared ownership home with someone else?

Up to four people can become joint owners but all joint applicants must individually and jointly meet the eligibility criteria.

What kind of property can be bought through shared ownership?

Shared ownership homes may be new or renovated flats or houses which are sold by social landlords. Prices vary according to location but are expected to be within the means of those people who cannot afford the prices of properties available for sale in the open market.

How does shared ownership work?

The scheme allows you to purchase a share of a property from a social landlord, usually a housing association. The share you purchase is funded by a mortgage which you will need to arrange with a bank or building society. The remaining share you do not own is rented from the social landlord.
The size of the share to be purchased will depend on your income and savings. Normally applicants buy a 50% share but you may purchase a smaller or larger share (to start with, you can buy as little as 25% or as much as 75%). The higher the share you purchase the less rent you will have to pay. You will also have to pay a service charge when you buy a flat. Later on, if you wish and can afford to do so, you can buy a further share.

When you purchase through shared ownership, the social landlord will grant you a lease, which sets out your rights and responsibilities.

What does the shared ownership lease entitle me to?

Whether you buy a house or flat under shared ownership terms, the social landlord will grant you a lease usually for 99 years. It will entitle you to live in your home as an owner-occupier. It will also entitle you to buy further shares in the property and sets out how you can do this. It also states that you can sell your property. Other points covered in the lease set out your responsibility for repair and payment of rent and service charge. Although you have not bought the property outright, you will have the normal rights and responsibilities of a full owner-occupier.

If you have any questions on how the scheme operates ask the social landlord selling the property. You are also advised to take your own legal advice on the terms and conditions of the lease.

What are the initial costs of a shared ownership home?

You will have to pay for:

• Survey - You may wish to have your own, survey which you must pay for.
• Legal fees - You are advised to get a solicitor/licensed conveyancer to help you with buying your share. It is worth asking for an estimate before engaging a legal representative, as fees vary.
• Deposit (if required – this is not always required)
• Stamp duty - This is a form of tax on the transfer of property. You should check with your solicitor/licensed conveyancer whether stamp duty is payable at the time of your purchase. If stamp duty is payable, you can either pay duty on your share or on the full value of the property. Your solicitor/licensed conveyancer should be able to advise you on which option to take.
• Mortgage indemnity insurance (if required)
• Removal costs - You will need to consider the costs of removal. These can be quite large if you are moving several miles from the area in which you currently live.

What are the running costs?

Mortgage repayments
You may need to borrow all or part of the cost of your share from a building society or bank.

Rent
The monthly rent will be a proportion of the total rent the property would fetch, calculated by the social landlord based on the proportion of the share you do not own. For example, if you own a 50% share you would pay 50% of the total rent. This rent will take into account the repayments you make as an owner-occupier, and your share of any insurance, maintenance and repairs. It will therefore be less than the normal rent you would pay if you were renting the whole property. The rent will usually be reviewed every year.
Council tax - You will have to pay the council tax to the local authority.
Repairs, insurance and service charges If your home is a house, you will be responsible for all repairs and redecoration both internally and externally. The social landlord will insure the structure of your home and you will have to pay a small management charge to cover this and to help meet the costs of rent collection. If your home is a flat, you will be responsible for all repairs and redecoration internally. The social landlord will undertake to keep the building in which your flat is situated in good structural repair, to keep the structure insured and to keep any common parts, such as the staircase and corridors, decorated, cleaned and lighted. You will have to pay a share of those costs. This is called a service charge. The social landlord must tell you how the service charge is spent and you will be consulted before any major repair or maintenance work is put in hand. Any damage or defect should be reported to the social landlord immediately.
Heating and lighting bills and water rates
You are of course responsible for your own bills.
Fittings and furniture
You are responsible for supplying your own fittings and furniture and for the cost of insurance for the contents of your home.

How do I buy a shared ownership home?

1. Applying to buy
   The social landlord sends you details of the scheme and an application form.
2. The social landlord’s response
   If they consider you a suitable applicant, they will usually ask to meet you to talk over your application.
   If successful you will be invited to view the property and told the purchase price. The price is usually based on an qualified valuer’s valuation.
   If you want to go ahead and buy, you agree the size of share you wish to buy and then arrange your own mortgage.
3. Arranging a mortgage
   As your broker, Smaart Associates will research the mortgage market and recommend the most suitable mortgage for you. We will help you with the application and speak with the lender on your behalf.
4. Purchasing the home
   Once the building society/bank has offered you a mortgage, let the social landlord have the name and address of your solicitor/licensed conveyancer.
   The social landlord then sends a copy of the draft lease to your solicitor/licensed conveyancer, who advises you on what it says, approves it on your behalf, makes a local authority search, and investigates title to the property.
   The social landlord will advise you of the amount of rent and service charge you will have to pay on the remaining unsold share.
   The purchase can then be formally completed and the house or flat will be yours.
5. Buying further shares in my home
   If you want to buy a further share, you will first need to tell the social landlord in writing the share you wish to purchase. The detailed procedure is contained in your lease. Your landlord will get the property valued when it receives your letter and will let you know the cost of the further share. You will have to pay the valuer’s fee. You should be given three months to arrange a mortgage and complete the purchase of the further share.
   

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