Shared Ownership is an affordable way to part buy and part rent your home. It is partly financed by a Government grant, so cheaper than buying a property outright and the combined monthly rent and mortgage payments are lower than the monthly cost of a full mortgage. You can buy as little as 25% or as much as 75% with an option to buy further shares when you can afford to do so. Although you may not own the property outright initially, you are a shared owner with the normal rights and responsibilities of a full owner occupier. The Banner Jones conveyancing team in Chesterfield, Sheffield, Dronfield and Mansfield, have lots of experience with Shared Ownership properties so let us guide you every step of the way.
At what point in the process is it legally binding?
You can withdraw from a sale or purchase up until the point contracts have been exchanged. Any deposits paid after exchange of contract will then by non-refundable. After contracts are exchanged you are then responsible for the property you are buying and should arrange suitable insurance from this date.
Do I have to arrange buildings insurance?
No. That is done by the landlord/housing association and part of the rent payable reimburses the cost of the buildings insurance.
How does Shared Ownership work?
A monthly rent is paid to the landlord in respect of the share you have not purchased. For the percentage share you buy you will normally require a mortgage. Certain lenders do not accept Shared Ownership property but the housing association can normally put you in contact with a mortgage adviser who is used to dealing with this type of application.
How long are local searches valid for?
A local authority search completed for a house purchase is valid for 3 months.
How long does the conveyancing process take on average?
We usually say 4-6 weeks for an average sale or purchase. Queries and concerns can often come out of the local authority searches which need further investigation and sometimes this leads to re-approval from the Mortgage lender. This can add further time into the process.
What are the initial costs I will have to pay?
Owning a home can be expensive and you will need to consider things such as re-decoration, utility bills, fittings and furniture and insurance for the contents of your home.
Other costs you must budget for monthly include mortgage repayments, rent on the proportion of the share you do not own, council tax and any service charge (if applicable).
There are also some initial costs involved in buying a Shared Ownership property just as there is when you buy on the open market and these will need to be paid from your own savings. These include:
- Stamp Duty - The calculations as to whether you have to pay Stamp Duty is more complicated with a Shared Ownership property. You can be exempt from paying this if you purchase up to 80% share in the equity. However, if the value of the percentage share you are buying is over £125,000.00 then you will have to pay Stamp Duty. We would discuss the options regarding Stamp Duty with you as part of the transaction.
- Deposit – if required.
- Survey/Valuation – This is essentially if you are purchasing a property with a mortgage and is normally arranged through your mortgage broker or lender.
- Legal fees – This covers the work we do to complete the transaction and it will always be a fixed fee. Contact us for a free quote.
What happens if we can’t produce certificates for work we’ve had done on the house we’re selling?
You can indemnify the work by taking out an insurance policy. This means that you can not be held liable for any future fault on the work that was done. We can arrange this for you
What is staircasing?
In the future you can gradually buy a bigger share in the house and in most schemes you can eventually own it outright. There is no obligation to purchase a larger share but the scheme is designed to be flexible should your circumstances change.
Initially you contact the housing association who will arrange a valuation and will offer you a price to purchase the extra shares. Any improvements you have made to the property will be disregarded in calculating the price of the further shares. Once you have completed the purchase your rent is reduced accordingly but your mortgage payments may increase.
What is Stamp Duty and how much will I have to pay?
Stamp Duty is a tax levied by HM Government on a transfer of property. For residential property this tax is calculated at 1% for property values between £125,001 and £250,000, 3% for values between £250,001 and £500,000 and 4% for those of £500,001 and over. Duty may also be chargeable on any rental charge (leases only) - this affects both residential and commercial leases where different thresholds are applied.
What is the difference between Joint Tenants and Tenants in Common?
Tenants is Common is where two or more people are entitled to the proceeds of sale in distinct shares - on the death of one, his/her interest will not pass to the survivor(s) but will be part of his/her estate. Joint Tenants are on the other hand 50/50 Co-owners of land - when one of them dies, his/her rights of ownership pass to the survivor(s).
Who qualifies for Shared Ownership?
To qualify for Shared Ownership you must be in employment and be in a position to raise a mortgage for the part you are buying. The amount you must be earning will vary depending on property prices and where you want to live. However, if you have sufficient income to enable you to purchase a home outright then you will not qualify. Priority is normally given to those in need and those on housing waiting lists but each individual housing association has their own requirements.
Will I have to pay a deposit?
This depends on your finances, but normally yes. If for example you are renting 50% with a mortgage of 45% then a 5% deposit will be payable.
Will it be leasehold or freehold?
Whether you buy a house or flat your interest in the property will be leasehold because the housing association owns the property and is the landlord. They will grant a Lease, typically 99 or 125 years, and you will be subject to the terms of the Lease. Banner Jones would provide you with a full report of your rights and responsibilities under the terms of the Lease during the transaction.
Will there be service charges?
Not always. If the property’s communal areas are maintained by the housing association then yes there will be a service charge. Some Shared Ownership properties do not have a service charge.