How To Buy Shared Ownership Homes

Buying Your First Home

Getting your first home these days seems to be an impossible task. Youngsters today are struggling to even rent – especially as 2-bed houses in most areas go for about £650 a month and a 2 bed flat in London can be rented out for about £1200. This is impossible for a youngster to afford on a starter wage. This is probably why my 29-year-old still lives at home! But there are options for first-time buyers to buy shared ownership homes.

What Are Shared Ownership Homes?

A shared ownership home is where the first time buyer has the option to buy a percentage of a home. Then the housing company owns the other percentage. You usually start at owning 25% of the property and then you can add more of a percentage as you can afford it.

The shared ownership homes are available to everyone as long as you fit into their criteria. Usually, you need to be a first-time buyer. You need to have a maximum income (this stops people with money from buying the property to rent out). You also need to be able to secure a mortgage and be able to afford the minimal rent for the percentage that you don’t own.

Buying your share of the home

Whether you are purchasing a 25% or 85% share of the property, you need to secure funding for the percentage that you own. The best part of this is that if you have been saving hard for a home, and you have a lump sum to put down as a deposit, then you will need to borrow less and therefore have a smaller mortgage. If you come into some money, then you can purchase further shares (often referred to as staircasing) and eventually own the property outright – then you only have your mortgage to pay.

Most people need a mortgage to buy a property. But as the mortgage on a shared ownership property is lower than a mortgage on a normal property, you will need less of a deposit. This makes it easier to get onto the property ladder. People looking to buy their own homes can actually afford to buy somewhere.

The only downfall with shared ownership properties is that very few lenders actually offer shared ownership mortgages. You may need to shop around a bit to find the right one or enlist the help of a mortgage advisor and broker to find one for you.

Making it easier to buy your first home

As a first time buyer, you may not be sure what to expect when you buy a house, so you need all of the help that you can get. Here are some tips to help you to reach your goal.

• Get advice from friends and family – many of them will have been there and done it already. They can give you some great tips.
• Speak to a mortgage advisor. As I said earlier, getting a mortgage for shared ownership properties is sometimes difficult. But if you get a mortgage adviser to help you, they will know who to go with and what the best rates are.
• Start getting your paperwork together. Keep bank statements and wage slips in a file. Put your deposit into a separate account because you will need to show that you have evidence that you can afford the mortgage. Don’t forget you will need identification to buy a house too.
• Visit the area that you are buying a property in, drive or walk around. Check out the neighbours. Is it a nice area or are the gardens like a tip yard? Is it noisy with boy racers and kids running about? Or is it perfectly tranquil and idyllic? You don’t want to be stuck with a house that you don’t feel comfortable in. Speak to the neighbours and ask what the housing association are like.
• Find out what you are responsible for on the property and what the housing association are responsible for. who pays the buildings insurance? etc.

My experience of shared ownership

I actually live in a housing association home. I bought it as I was fresh out of a marriage and had three kids. And I didn’t want to be in rented accommodation. So I took my settlement and put it into a property. I own 55% of the property and I bought it 20 years ago for £30k. And I don’t think it has gone up much more in price over the years but it has been a place where my little kids became adults, then a new baby was born and the older ones flew the nest.

I am still here with two kids and my house was always bursting at the seams. But it was my own home, it belonged to me. And now there is no mortgage and I literally pay £200 a month rent. I do not know anywhere that you could rent a 2-bed property for that price. When I first moved into the property, the rent was £97 a month. So it hasn’t gone up much in 20 years!

Over the years, I thought about buying more of a percentage of my home. This is called staircasing, but make sure you speak to your mortgage advisor before you buy the property to check how easy it is to buy more of a percentage. As time goes on you might find yourself in a better situation financially where you can buy more of your home. This then reduces the rent that you pay. So in the long run, it is worth doing.

Recommending shared ownership properties

Sometimes the only way to get on the property ladder is to go with shared ownership homes. And it really can’t be that bad of a price because I am still living in mine after 20 years. But you do need to make sure you get the right professional advice. After all, this is the biggest purchase you are ever likely to make. So making sure you have a mortgage adviser is a huge recommendation from me. It takes away so much of the headache of purchasing a home. 

Make sure you have a solicitor who corresponds through emails. My friend recently bought her first home and her solicitor was very old school, he only used Royal Mail to contact her and it made the process so much slower than usual.

But the most important thing is you will have your own home to love for many years to come. Good luck!