Help to Buy - Shared Ownership
HELP TO BUY: SHARED OWNERSHIP
The Help to Buy: Shared Ownership scheme is for home buyers who cannot afford the full 100% mortgage on a home. It helps you get on the property ladder by reducing the percentage of the property you need to purchase.
In a typical house purchase, a buyer would pay the asking price of a property either through cash or mortgage. In a Help to Buy: Shared Ownership scheme, the new build developer or housing association (in some cases) will allow you to buy a share of the property..
It enables the home buyer to buy a share of the property, between 25% and 75% of the homes value, and pay rent on the remaining share. You have the option later on of buying bigger shares when you can afford it.
To qualify for a Help to Buy: Shared Ownership scheme you must:
- Have a household income of £80k or less (this rises to £90k or less if you are based in London)
- Be a first time buyer; or you used to own a home but can't afford to buy one now; or you have an existing shared ownership property and are looking to move somewhere else.
- Buy a New Build home OR an existing home through a resale programme offered by some housing associations.
- Pay for your share of the home’s purchase price through a mortgage or your own savings. (You can use a Help to Buy: ISA or Help to Buy: Equity Loan to go toward your deposit)
Note: shared ownership properties are leasehold. It is important you check the term of the lease before signing anything.
Shared ownership properties through government funded schemes are available to anyone that meets the above criteria, but military personnel may be given priority over other groups. However, councils with their own shared ownership home-building schemes may have their own priority groups, depending on the needs of the local housing market.
People with Disabilities.
If you have a long term disability you may find the homes available in your area are not fit for purpose. If that is the case, you may be eligible under HOLD to buy any property on a shared ownership scheme.
HOLD stands for Home Ownership for People with Long-Term Disabilities. You can only apply for HOLD in instances where Shared Ownership properties do not meet your needs, ie perhaps you need a property that is ground floor only, and all Shared Ownership properties are multi level.
If you are aged 55 or over you may be eligible for a related scheme called Older People’s Shared Ownership. It works in the same was as the general Shared Ownership scheme, but you can only own up to 75% of the home, meaning you could never own the home outright. However, once you reach 75% ownership you will not pay rent on the remaining 25%.
Stamp Duty and Shared Ownership Properties
Stamp duty still needs to be paid on Shared Ownership Properties and it can be calculated in one of two ways.
- Market Value Election - You pay the full stamp duty of the property as it would have been had you paid for the property in full. That settles the Stamp Duty and there is nothing else to pay.
- You pay stamp duty on the value of the share you buy. You then pay no further stamp duty until you own 80% of the property, then the stamp duty is calculated on the value of the property at that point in time.
Why would anyone pay all the Stamp Duty up front you might ask. If you know you are going to eventually own the property in full at a later date, it could be a sensible move. Particularly in a rising housing market. Especially if the value of your home at the time of initial purchase sits just below a stamp duty threshold. It could potentially save you money in the long run.
Remember: Housing markets can go down as well as up, which means the value of your property can go down too, so any decision you make here is an educated guess but also a gamble. This isn’t advice on what you should do. It is merely representing a reason why someone might choose that option.
This is a very basic view on the Stamp Duty Requirement of Shared Ownership. For more information we recommend reading the Government Shared Ownership Guidance Page.
Applying for a Help to Buy: Shared Ownership scheme
To buy a home through a Help to Buy: Shared Ownership scheme contact the Help to Buy agent that covers your area. Our Yorkshire clients will need to contact Help to Buy North East, Yorkshire & Humberside, click the link to access the application form.