Shared ownership can help you get on the property ladder but, when you’re ready to move on, what are your options?
Shared Ownership Next Steps
The Shared Ownership scheme makes buying a property more affordable. It’s offered by housing associations and councils, and its aim is to help those on lower incomes as well as key workers to get a step on the housing ladder.
The ‘shared ownership’ means that the new homeowner owns part of the property, but a percentage still belongs to the council/housing association – meaning that the new owner pays both mortgage and rent.
You can buy from 25-75% of a property to begin with but as your circumstances change, you may wish to move on from the property. Changes that could influence your decision include a growing family, an increase in salary, or increased equity within the property.
Options for your next steps
If you start earning more, it is possible to ‘staircase’ your purchase. This means that you buy a bigger share in the property. In most cases, you can staircase your purchase up to 100% – this also means that you can apply to own the ‘freehold’ to the property too (most shared ownership homes are offered on a leasehold basis). Once you own all of your home, you are usually then free to sell it on the open market.
You will need to check your contract regarding the condition of staircasing – in some cases you must have lived in the property for a certain amount of time (usually around three years), and you can only increase in increments of 5-10% or more. You may also be limited on the number of times you can enter the staircase – so it’s important to plan this carefully.
You will probably have to take out a new mortgage to facilitate staircasing – and remember that you will also have fees to pay, including valuation fee, legal fees and mortgage fees. You may have to pay stamp duty, too.
In April 2021, a new option was introduced for shared ownership homeowners, which allows them to increase their share of ownership by as little as 1%. You can do this each year for up to 15 years – with the expectation that this increase will be paid for with cash – not an increase in mortgage. There will be no valuation fees charged if you choose this option.
Not all lenders offer shared ownership products and they may have different lending criteria, so it makes sense to use an independent adviser who is familiar with the products to help find the right mortgage for you.
If you have come to the end of your mortgage deal, you will of course need to look at remortgaging. This is a good time to look at increasing your share of the property if you are able, and even if you don’t want to do that, it’s a chance to get a better rate on your mortgage, which could see your monthly payments decrease. Talk to an independent adviser who has good knowledge of the shared ownership mortgage market for the best advice.
If you want to increase your share in your home, you may also need to look at remortgaging – this can give you an opportunity to both own a bigger proportion of your property, but also might offer the opportunity to pay back money previously lent by family, or even just to get a better rate on your payments.
If you don’t own the property in its entirety, selling it may be a little more complicated, but it is perfectly doable. It is also worth bearing in mind that it is possible to move from one shared ownership property to another – they don’t even need to belong to the same housing association. Talk to your association if you are thinking about making this move.
The first thing you will need to do is give notice to the council or housing association of your intention to sell and you may have to do this even if you own the entire property. They will then have first refusal on selling the property – usually it will be offered to another shared ownership buyer. This option usually lasts for between four and eight weeks from your notification.
There’s a number of fees associated with this – marketing fees will be upwards of £300, a valuation fee can cost somewhere around £250, legal fees can cost around £1500, and you’ll need an Energy Performance Certificate, which costs around £50.
If the housing association is unable to find a suitable buyer within that timeframe you can market the property yourself – however, you may have to sell it on to someone who meets the criteria for shared ownership. Rules vary between housing associations, so check with yours to find out what the situation is. Another point to note is that the property cannot be sold for less than its valuation price – although of course it can be sold for more.
So, before you make any decisions, check with your housing association and read your contract to see what your options are – and then seek independent advice.
Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across England and Wales. If you would like to discuss this subject or any other financial matter, please contact us on 01635 521 300 or email firstname.lastname@example.org.
YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.