What is Shared Ownership?
Shared Ownership is a government scheme, aimed to help First Time Buyers (and others who can’t afford a property traditionally) onto the housing ladder.
It allows you to buy a portion of a property, which means the amount you need for a deposit is lower than if you were buying a whole property. It also improves affordability on the amount you are buying. You pay mortgage repayments on the proportion you own, and a reduced rent on the part you don’t. The part you rent is usually owned by a housing association.
Read more in our guide to Shared Ownership.
What is a Shared Ownership valuation and when would I get one?
The situation of part-owning and part-renting is designed to be temporary, with the idea that you’ll gradually purchase more of the property until you own it outright. This process is known as staircasing. Because you purchase the property in percentage increments – for example, 10% at a time – you’ll need an up-to-date market valuation each time, so you know how much you’ll need to pay.
How might a Shared Ownership valuation affect my property?
If the valuation shows the value of the property has increased since the last valuation, your rent will increase in line with that. However as you’re purchasing more of the property, the proportion you’re paying rent on will be smaller. So this may even out the difference. Rent is usually calculated as 3% of the part of the property you don't own, divided by 12 months.
For example:
Total flat value upon purchase: £350,000
You bought 35%: £122,500
Rent: £568.75
After valuation, total flat value is £365,000
Your 35% is now worth: £127,750
You buy an extra 5%: £146,000
Rent: £547.50
There might also be implications on the cost of the process. For example, as Stamp Duty is calculated as a percentage of the property price, an increase in property value will push up your Stamp Duty bill. Other costs, such as conveyancing, might also be higher. It’s a good idea to assume the cost of the transaction will be slightly higher than you think, so you’re still able to proceed with the purchase even if the property value is higher than you thought.
Once you’ve got your valuation, you can use our Stamp Duty Calculator to work out how much you’ll need to pay.
Do I need a Shared Ownership valuation?
Yes – but only when you staircase of if you are selling the property.
So if you’re worried about a valuation pushing up your rent, you could staircase by a larger amount, rather than small increments. This will mean your rent is less likely to increase (compared with the equity you’re buying) and limits the costs of multiple valuations, conveyancing fees etc.
You also are not obligated to staircase at all – if you are happy with the portion of your shared ownership home, you can simply stay put.
You can read more about how to get the best out of the Shared Ownership scheme in our list of pros and cons.
Here at reallymoving we can help you save time and money when looking for a RICS registered Surveyor to carry out your Shared Ownership valuation, whether you’re staircasing or selling.