Buying a shared ownership property
Shared ownership is a government scheme that is also known as ‘share to buy’ or ‘part buy, part rent’. It allows buyers to purchase a share – normally between 25% and 75%, (but it can be as low as 10%) – in a property, and pay below-market-value rent on the remainder to a housing association. As buyers only need mortgage finance on the portion of the property they own, they can get on the property ladder with a much lower deposit than if they were buying the property outright.
In order to be eligible for shared ownership, you must:
- Be over 18 years of age
- Have an annual household income of under £80,000 (£90,000 in London)
- Be unable to afford a property on the open market
- Not own another home – if you aren’t a first-time buyer, you must be in the process of selling your current property
- Have a deposit of (typically) 5% – 10% of the equity share you are buying
- Have a good credit history.
The purchase process
To get started, you must make an account with Share to Buy, the official site for shared ownership properties. This will allow you to search for suitable shared ownership properties and register your interest in particular properties with the relevant housing associations.
If you would like to move forward with purchasing a shared ownership property, the housing association will need you to put down a reservation fee and attend a financial assessment to see how much of the property you can afford to purchase. You’ll then need to consult with a mortgage broker or lender to secure mortgage finance on the share of the property agreed with the housing association.
You should also instruct an experienced solicitor as early as possible to minimise delays on your end of the transaction. Our Shared Ownership solicitors can support you with all the necessary paperwork, conduct property searches, liaise with the housing association’s legal department on your behalf and generally ensure that everything is progressing as it should.
We’ll also ensure you fully understand the transaction you are entering into, including the fact that your property will be leasehold and you will still be a tenant, meaning there will likely be certain restrictions on what you are able to do with and in your property in accordance with the terms of your lease. As a tenant, you will also be liable to pay ground rent and service charge to your housing association in addition to your rent and mortgage payments.
Once we have reported to you and you have confirmed that you are happy to proceed, the next step is the exchange of contracts, which we will take care of on your behalf. Once contracts have been exchanged, you are legally obliged to buy the home and can’t back out. You will also agree your completion date which is the day you get to move into your new home.
On the day of completion, your mortgage lender will release the funds needed to buy your share in the property to us, and we will forward the money on to the housing association. You can then pick up your keys, move in your belongings and enjoy your new home!
For a quick, printable overview of the purchase process, please download our Shared Ownership Roadmap.
Frequently asked questions
Dealing with a number of shared ownership cases every year, we find that our clients often want to know the answers to the following common questions:
Will I need to come to your offices during the purchase?
Whilst we’re always happy to see our clients face-to-face, we understand that people are busy and may not have time to visit us at the office – and that’s absolutely fine. We can deal with all matters relating to your transaction via post, email or telephone calls. There is no extra charge for face-to-face meetings at the office, so please feel free to do whatever works best for you.
How long does it usually take?
Unfortunately, there’s no easy answer to this question – every transaction is individual and can be quicker or slower depending on a wide range of factors. We usually find it takes between ten and twelve weeks to complete a standard shared ownership purchase after receiving the contract papers, but this is a very general timescale.
We can assure you, however, that the Shared Ownership team at Attwaters Jameson Hill will be doing everything possible on our end to complete your transaction as soon as possible.
How much deposit will I have to pay and when?
You’ll agree your deposit with the housing association when you reserve the property.
Before you pay your deposit to us, we’ll need to see a bank statement confirming that your deposit is in a UK bank account for due diligence purposes. You will then pay your deposit to us using the bank details we will give you before contracts are exchanged. The funds will need to have cleared in our bank account before we can proceed.
If you are also selling a property, it is customary to use the proceeds of your sale to pay the deposit on your purchase and to request that the seller accepts this, even if it is less than 10%.
I’m renting – when should I give notice to my landlord?
Until contracts are exchanged, your purchase and completion date are not legally binding, so we’d strongly advise that you don’t give notice until exchange of contracts has taken place. We understand that you will want to avoid an overlap of rent payments on your current property and mortgage and rent payments on your new home. However, if you give notice to your landlord before contracts have been exchanged, you run the risk that your purchase might not complete on the date you have in mind and you might have to move out of your rental property before your new home is ready.
What if I change my mind and no longer want to buy the property?
You can withdraw from your purchase at any time before exchange of contracts, although you will lose any money you have paid out so far, for example on surveys,and property searches.
After exchange of contracts, both parties are legally obliged to complete the sale/purchase. If you are unable or unwilling to complete the purchase after contracts have been exchanged, you will forfeit your deposit and you will also be liable for interest payments to the seller for the delay in accordance with the contract terms. The seller might also be able to sue you for any financial losses they have suffered as a result of your failure to complete the contract. If you have paid a deposit of less than 10%, you’ll also have to pay the difference between your deposit and 10% of the purchase price to your seller.
It is therefore essential that you ensure you have the financial means to complete your purchase before instructing us to exchange contracts. We will discuss source of funds with you at an early stage.
When and how will you receive my mortgage funds?
We always request the funds directly from the lender, to be released the day before completion is due to take place. We submit our request to the lender before contracts are exchanged to ensure that the lender will release the funds to us in good time for completion. The lender will complete any final checks and confirm that the mortgage advance will be available for completion.
When do I pay my outstanding balance to complete my purchase?
We will forward you a draft completion statement at exchange of contracts, which will outline the balance still owing on your purchase. The money will need to be in our account the working day before completion takes place. Most clients will do this via a bank transfer, although we can accept cheques. Please note, however, that a personal cheque will take 10 working days to clear into our account.
What happens on completion day?
On completion day, we’ll transfer the purchase funds to the seller’s solicitor using a same-day transfer. Once this has arrived in the seller’s solicitors’ account, they will instruct the seller or their agent to release the keys to you. Most sales complete between 12pm and 2pm, although it does depend entirely on the banking system. Once we have asked our bank to send the money, we have no control over how long it will take to reach the seller’s solicitors’ bank account.
Do I have to pay Stamp Duty?
Depending on your purchase price, there are two options when it comes to paying Stamp Duty on shared ownership properties.
If you are the first owner of the shared ownership property (i.e. it is a ‘new lease’) you can choose to pay Stamp Duty on the full purchase price of the property, irrespective of the share you are currently buying. First-time buyers only have to pay Stamp Duty on purchases exceeding £425,000; for everybody else, the threshold is £250,000.
You can choose to just pay Stamp Duty on the share of the property you are buying. However, if you choose this option you have to pay tax not only on the purchase value, but also on the rent you are paying to the housing association. This is calculated according to a complex formula, but it’s much easier to use this calculator provided by HMRC.
When you staircase the ownership of your property, further Stamp Duty is likely to be payable depending on your ownership percentage.
We will provide you with a Stamp Duty calculation at an early stage in your transaction so that you can ensure sufficient funds are available.
What happens after completion?
Once your purchase has been completed, we’ll make your Stamp Duty payment on your behalf and register the property in your name. Once this has been done, we will forward you a copy of the register of title for your records (the original is retained by the Land Registry).
Please note that the registration can take some months to complete, during which time you won’t be able to sell or remortgage the property.