What is shared-ownership? Seven things homebuyer's need to know

Thousands of new homes across London are offering opportunities to buyers. We explain exactly how shared-ownership works - who qualifies, what you get and how much it costs...
1. So who can qualify for shared ownership?
Shared ownership was originally set up for key workers — people such as nurses and police officers.

However, as London’s housing crisis has spiralled, shared ownership has been extended to cover anyone with a household income of less than £71,000 if they are buying a one- or two-bedroom flat, or an income of less than £85,000 if seeking a three-bedroom home.

To add a little confusion, some boroughs impose lower income limits, which could mean that you are eligible in one postcode and not in another.

There are also minimum income limits — your finances will be checked to make sure that you can afford repayments on the property.

People already living near to a shared-ownership development get first dibs — which means that if you live in Greenwich, a shared-ownership hotspot, you will have a reasonable choice of schemes, such as Greenwich Peninsula, which launched this month with one- and two-bedroom apartments priced from £90,000 for a 25 per cent share (see lqpricedin.co.uk for full details).

But if you live in Kensington & Chelsea, you can pretty much forget it.

READ MORE: The essential guide to buying a shared-ownership home


2. Where do I look?
Shared-ownership homes are advertised on the main property websites, specialist estate agents, and by the housing associations themselves.

3. What will I find?
There are nuggets in central London, and leafy areas of west London, that come on to the market and go quickly, but mainly, they are in big regeneration zones (think Stratford, around Canary Wharf and the Isle of Dogs, and Wembley).

Prices in big chunks of London are now far too high to sustain shared ownership — even a 25 per cent share of a two-bedroom flat in, say, Islington, is likely to be too expensive for someone earning £71,000. And developers often try to wriggle out of providing shared-ownership flats.

Government guidelines for developments of one to 10 units recommend 20 per cent of affordable homes (usually shared ownership), and in schemes of more than 10 units, 40 per cent, but some developers try to find ways to avoid this, such as making payments in lieu to the council. There is no absolute quota on the amount of shared ownership required.
 
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Buy a slice: Nordic Quarter in Colindale from Network Living

4. What about mortgages?
Most big lenders offer competitive shared-ownership mortgages, although ‘regular’ first-time buyers often get slightly better deals. Halifax, for example, offers 90 per cent mortgages at 4.04 per cent to shared owners, against 3.59 per cent to first-time buyers. And, as ever, the larger the deposit, the better the rate. Lloyds offers shared owners with a 40 per cent deposit an interest rate of 1.74 per cent, against 2.04 per cent for first-time buyers.

5. What will it cost me?
Network Living is selling shared-ownership homes at the Nordic Quarter development in Colindale, north London. You can buy a 35 per cent share of a two-bedroom flat with a full price of £349,000 for £122,150.

This means you will need to raise a deposit of just over £6,000 (assuming you can get a 95 per cent loan), and a mortgage of a bit over £116,000. Monthly loan repayments will add up to about £638. You will then pay a rent of just under £520, and service charge at about £129, giving a grand monthly total of £1,287.

6. Can I increase my share?
Yes. If you get a pay rise or a windfall, you can increase your stake — a process called “staircasing”. Check with your association about how much it will let you buy back and how fast, as all have different rules. Staircasing will usually involve increasing your mortgage — but your monthly rent will fall.

7. What happens when I want to move on?
Housing association rules vary, but most will insist that you market the property to people on their waiting list — based on an independent valuation — for several weeks.

If it does not sell, only then can go to an estate agent of your choice, and try to sell for whatever price you want. However, once you have staircased and bought the property outright, you can sell it in the normal way.
 

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