Shared ownership - A guide for purchasers

Shared ownership helps a range of people who cannot afford to buy a home of their own outright.

This guide provides information about shared ownership, about how the scheme works, what is involved and what to do if you would like to buy a home.

There are now a range of options open to applicants looking to purchase .

What is shared ownership?

Shared ownership is an alternative to renting and full ownership. It is particularly suitable for people with a regular income who want to buy their own home but cannot afford to do so.

With shared ownership you buy a share of your home and pay rent on the remainder. Shared ownership does not mean that you share your home with someone else.

Shared ownership is usually arranged through Registered Social Landlords (RSL's) like the Trust. They are non-profit making organisations that provide good quality affordable homes for rent and shared ownership.

The total monthly costs of the rent and mortgage should be lower than the cost of a mortgage needed to buy 100% of the same home. This is because shared ownership is often supported by government money which reduces the rent.

Who can become a shared owner?

You can be nominated from the Local Authority waiting list or apply direct. Shared owners might include those looking for their first home, someone leaving their owner-occupied home following a relationship breakdown or an owner-occupier moving for work reasons to somewhere with higher house prices.

Who cannot become a shared owner?

Those who can afford to buy a home that meets their needs.
Those who cannot afford the combined cost of the rent and mortgage.

How does shared ownership work?

You can usually buy between 25 and 75% of the value of the property. On re-sale the property is often sold on at the percentage the current owner has.

Shared owners pay a monthly rent to the landlord, covering the share they have not purchased. For the percentage share you purchase, you will normally require a mortgage. Some applicants may have a cash deposit.

Mortgages are available from building societies and banks and will often give you an idea of how much they will lend without a particular property in mind.

We cannot recommend a particular Bank or Building Society. We can however give an indication of some we have worked with in recent years.

• Halifax
• Abbey
• Nationwide
• Leeds Building Society
• Northern Rock
• Cheltenham & Glouscester

Some lenders will allow you to get a 100% mortgage on the share you purchase. If not, you will need to find a small deposit (approximately 5% of the share you are buying).

How much does shared ownership cost?

The exact amount you pay each month will depend on such things as the price of the property, the size of the share you buy, the rent and mortgage costs. The larger the share you buy, the higher the mortgage costs. Rent will be less on a higher share as you are only paying rent on the equity owned by us.

As with buying a house of your own, becoming a shared owner involves certain costs. Some costs are 'one offs', others will be regular. Examples of the costs involved are listed below:

• Legal fees - for your solicitor or conveyancer which are usually in excess of £450

• Valuation / survey fees - These are required by your lender. There are three levels of survey with the basic survey starting at approximately £150
• Stamp Duty - This is payable on properties where the purchase price exceeds £125,000
• Mortgage Arrangement Fees - Please check with your individual lender
• Insurance Premiums - Insurance can be taken out to cover you in the event of death or serious illness, unemployment, sickness. You will also be required to insure your own belongings - contents insurance. Under the terms of the shared ownership lease we insure the building on your behalf.
• Deposit - the greater the amount you are able to pay at the beginning, the lower the costs will be in terms of your monthly mortgage payments.
• Moving Expenses - removal costs plus costs involved in furnishing a property, re-direction of mail etc

Don't forget that once you've moved in there are everyday living costs which you need to be careful not to underestimate.

• Rent
• Mortgage payments
• Service charge (if applicable)
• Council tax
• Utility bills (gas/electric/water/telephone)
• Other household bills (TV licence etc)
• Repairs and maintenance costs. As shared owner are often responsible for these. Although you may only own a percentage of the property, you have the benefit of the whole of the property and are usually therefore responsible for maintaining it.

Property price	Rate of Stamp Duty
Up to £125,000	0%
£125,001 - £250,000	1%
£250,001 - £500,000	3%
£500,000 or more	4%

You should be aware that your home is at risk if you do not keep up repayments on a mortgage /rent or other loan secured on it.

Can I buy a bigger share in my home?

Usually, a year after you have moved in, you can apply to increase your share. This is known as staircasing and in most cases you can ultimately own the property outright. There is no obligation on you to do this but shared ownership is designed to be flexible to meet your needs as circumstances change.

Each time you buy at least a further 10% share and this will cost a percentage of the market value at that time. Your rent will be reduced as you purchase further shares however your mortgage payments may increase if you borrow more to fund the purchase.

If you have completed improvements to your home then the surveyor will be asked to estimate the value that this has added to the property. This amount would then be disregarded in calculating the price to purchase further shares.

What happens when I want to move?

It is no different from moving when you own your home outright. The first step is to inform us of your decision. You should also inform your mortgage lender.

We do not buy the property from you but we have the option to nominate a buyer and keeps a register of people wanting to purchase homes on a shared ownership basis.
If we do not nominate a purchaser within a reasonable time, then you may sell your property on the open market. We will still have to approve any potential purchaser.

Who benefits from any increase in value when I sell?

You, as the shared owner benefit from any increase in value of the property on the share you own. If the value of your home has increased by £20,000 and you own a 50% share, your share of the increase would be £10,000.

Remember though, house prices can fall as well as rise. If this happens, you will have to bear a share of the loss.

What should I do when I have been offered a property?

Instruct a solicitor to act on your behalf.

Confirm in writing that you wish to proceed and give us details of your solicitors
Arrange for a mortgage if necessary.

Do we recommend solicitors?

As with the mortgage lenders, we cannot recommend individual firms of solicitors. Listed below are some firms we have experience with.

Harrowell Shaftoe,1 St Saviourgate, York
Guest Walker & Co, 12a The Shambles, York
Ware & Kay, Sentinel House, Peasholme Green, York
Langleys Solicitors, Queens House, Micklegate, York
North Yorkshire Law, Albermarle Chambers, Albermarle Crescent, Scarborough
Birdsall & Snowball, 10 York Place, Scarborough
Drabble & Co, 409 Scalby Road, Scarborough
Cooper Wilkin Chapman, The Hall, Lairgate, Beverley
Norton Hall & Co, 12a Saturday market, Beverley
Hague & Dixon, 12 Smiddy Hill, Pickering
Ellis Lakin & Co, 8 Hall Garth, Lairgate, Pickering

Do I need to pay a deposit?

We do not require you to put any money down to secure the property

What legal obligations am I taking on?

You will be buying the property on a leasehold basis. The lease usually runs for 99 years. The lease sets out your obligations to the landlord and your rights. Your solicitor will receive a copy of the lease and will go through the details with you. It is also advisable to read the lease yourself and keep a copy for reference.

What happens if I become unemployed or my family circumstances change?

It is advisable to take out insurance at the outset. This is designed to ensure that your mortgage/rent and associated costs are paid for a specified period of time if you suffer accident, unemployment or sickness.

If you do get into financial difficulties and would like some advice, please contact us as we can ensure you are receiving all that you are entitled too. We also offers in certain circumstances, reverse staircasing. This is where we buy back part or all of your share in order to release equity to clear debt for example. This is not a automatic entitlement or right but it can help some residents whose homes might be at risk.

Other options to help with low cost home ownership

There are a number of options that may be suitable for you to consider. For advice on any of these, please contact us. Listed below are brief details of current schemes in operation.

Social HomeBuy - Enables our tenants to purchase their rented property either outright or on a shared ownership basis.

Right To Acquire - This is available to our tenants on properties built after April 1997and enables you purchase the property with the aid of a discount.

Open Market HomeBuy - This enables qualifying applicants to purchase a property on the open market with the aid of a equity loan for up to 25% of the purchase price of the property.

New Build HomeBuy- This enables applicants who cannot afford to purchase a property outright to purchase a newly-built property on a shared ownership basis. This applies to a number of properties built by other Housing Associations as well as us.