Lincs Rural > Find a Home > Shared Ownership

Shared Ownership

SHARED-OWNERSHIP EXPLAINED

Shared ownership is a tried and tested initiative which helps households buy a share of a property who are unable to purchase on the open market. It is an alternative to renting but is only appropriate for those who can support the financial demands of a modest mortgage. For example, if one of our properties was valued at £200,000 on the open market and you purchased a 50% share, then you would be expected to pay a purchase price of £100,000.

Please note that property prices can decrease as well as increase.

For example, if you bought a 50% share for £100,000 and later decided to move, the house would be revalued as if it was being sold on the open market and 50% of the new value would be the sale price. If the new market value was £220,000, then you would sell your 50% share for £110,000. For consistency, we insist that all valuations are carried out by an independent RICS registered surveyor (estate agents’ valuations are not accepted).

All homes are sold on a lease basis and Lincs Rural retains ownership of the percentage that you do not buy.

We are also required to take out building insurance on your behalf, recharged at a reasonable cost (buyers should check the annual premium on offer letters) and shared owners do not need to take out additional building’s insurance cover, however you will need to provide your own contents insurance. Some developments are subject to a service charge for maintenance. You will be expected to set-up a monthly direct debit to cover the costs payable to Lincs Rural.

WHO QUALIFIES

The majority of our homes are allocated on a local need’s basis. This means that in order to qualify, applicants must have a local connection to the parish in which the property has been built, either through several years’ residency (past or current), employment or close family.

All applicants will be asked to complete an application form that will be used to assess suitability.

If you are interested in applying for shared ownership, you must first register with a Help to Buy agent. They can then see if you are eligible to apply and support you with the application process.

You will need to register with them before you can make a shared ownership application online.

THE COSTS

The initial purchase price will depend on the percentage of the property that you’re buying; this is calculated by us and depends on property values in the area and development costs incurred, but is normally in the region of 40%-60% of the open market value. You will probably need to raise a mortgage and negotiate with a bank or building society to arrange this. Not all banks or building societies will lend on shared ownership properties but we are able to provide you with details of those that do. Most lenders will not lend 100% of the value, so you are expected to contribute some of your own funds towards the purchase; this is referred to as a ‘deposit’.

Depending on the type of mortgage that you arrange you may also be required to take out mortgage protection which provides insurance should your financial circumstances change and you default on payments. Please note that Lincs Rural are unable to provide financial advice and you may wish to consult with a mortgage broker.

When buying a shared ownership home, you should also expect to pay appropriate professional fees, which will include a solicitor and surveyor.

Although Lincs Rural will always retain a share of the property we are not responsible for any of the ongoing costs for maintenance and repairs.  Your lease will state that you, as the leaseholder, will be responsible for all maintenance and repairs to the property.

If you are purchasing a new build property, some repairs may be covered by the Building Guarantee provided by NHBC, if repair is a result of a building defect. For further details you should refer to the Building Guarantee booklet provided with the property manual.

AFFORDABILITY

Before committing to the purchase of a shared ownership property and the responsibilities of a mortgage, it is important to assess your financial capabilities. Similar to purchasing a property on the open market, purchasing a shared ownership home is a serious commitment and should be considered carefully.

Your monthly outgoings will include:

Your mortgage – The monthly repayment will vary depending on the amount you have borrowed, the repayment period and interest rates.
Buildings insurance – As the properties have been built with public subsidy and Lincs Rural will still own a stake in your home we are required to take out building’s insurance on your behalf. You will be expected to pay this through your monthly direct debit. Because we are insuring a number of homes we are able to access a very competitive deal.
Contents insurance – You will be expected to insure your own personal possessions and take out contents insurance.
Service charges – Many of our developments have communal areas, private roads, or infrastructure which will need to be maintained. If this is the case then all residents are required to contribute towards these ongoing costs through a nominal service charge, payable by monthly direct debit.
Utility bills – It will be your responsibility to arrange and pay for your own utilities which will usually include electricity, gas and water. These bills will be calculated using meter readings and costs vary depending on usage and supplier.
Council tax – This will vary depending on the local authority area.

BUYING EXTRA SHARES

Shared owners can purchase additional shares in their property, however please note that all of our property have an 80% staircasing restriction in place. This restriction enables us to keep our properties as affordable homes for local people.

You must have lived in your home for more than one year before you attempt to buy any additional shares and you can only exercise your right to do so three times. The value of additional shares will be based on a current open market valuation of the property, discounting any major improvements made by you. As a minimum you must buy an additional share of 10% and multiples of 10% thereafter. Please check your lease on the specifications.

Your rent will decrease as you buy further shares in your property.

DEALING WITH MORTGAGE DIFICULTIES

Your home is at risk if you fail to maintain your mortgage payments. If you experience any difficulties maintaining payments you should tell us and your mortgage provider straight away. We may be able to offer advice and guidance to help steer you through your financial situation.

MOVING ON

When you move, you sell your interest in your property to a new purchaser. You will need to instruct an independent RICS registered surveyor to carry out a valuation of your property. The sale price will then be calculated using the full market value of the property and the percentage you own.

LIVING IN A SHARED OWNERSHIP HOME

Shared owners can live in their homes as long as they wish, although many use it as a stepping stone to purchasing on the open market. It is important to recognise that these homes are designed to remain affordable in perpetuity for people on lower incomes, and that some restrictions apply to ensure this is achieved, including:

You cannot carry out any alterations to the property without our written consent. We will not allow extensions or Conservatories. Before any alteration can be considered by Lincs Rural you will be required to complete a permission form detailing what alteration you plan to make to the property. We also advise shared owners to consider any expensive additions/alterations carefully as they are liable for 100% of the costs but will only benefit from financial gains proportionate to the percentage that they own when they decide to move.
The property must be the only residence owned by the shared owner and sub-letting is not allowed and is a breach of your lease. We do not normally object to you taking in a paying lodger, but you will need to inform us.