Shared Ownership in Cardiff – What is it? How does it work?

The Shared Ownership Scheme is a government-initiated mortgage programme in the United Kingdom, designed to facilitate individuals in their pursuit of homeownership.

This scheme is open to permanent UK residents, encompassing both first time buyers in Cardiff and former homeowners who may be facing challenges in acquiring a new residence.

To be eligible, your household income must not exceed £80,000, and the property you intend to purchase is typically a leasehold. In a leasehold arrangement, you acquire the property for a predetermined period.

Participating in a Shared Ownership in Cardiff allows you to buy your home through a combination of a mortgage (usually covering a portion ranging from 25-75% of the property) and rental payments.

The rent, which may encompass service charges and ground rent, is generally set at a more affordable rate compared to market prices and is paid to a housing association.

Updates to The Shared Ownership Mortgage Scheme

From April 2021 onwards, the Shared Ownership Scheme underwent significant updates as part of the government’s Affordable Homes Programme. These modifications introduced several notable changes.

Firstly, the minimum requirement for property share purchases, previously set at 25%, has been revised. In certain cases, it can now be as low as 10%.

Additionally, when acquiring additional shares, the previous requirement of 5-10% minimum shares has been replaced, and individuals can now purchase them in 1% increments. Furthermore, the fees associated with buying these additional shares have seen a reduction.

Notably, the responsibility for maintenance and repair costs, which were previously borne by the homeowner, has shifted. Your landlord will now cover these expenses for the initial 10 years of ownership.

If you secured a Shared Ownership Mortgage in Cardiff before this timeframe, these new regulations may potentially apply to your situation moving forward. However, it’s advisable to confirm these specifics with your provider, as the applicability could be determined on a case-by-case basis.

How do I apply for Shared Ownership in Cardiff?

Before delving into the mortgage aspect of the process, your initial step involves confirming your eligibility for Shared Ownership in Cardiff. To accomplish this, your first point of contact should be your local Help to Buy agent in the area where you intend to make your purchase.

During this conversation, you will typically be required to furnish specific details, including your income, available budget, preferred location, and your credit history. Once your eligibility is established, you can proceed with the mortgage application.

Engaging the services of a mortgage broker is highly recommended in this phase, as not all mortgage lenders extend their services to individuals seeking Shared Ownership in Cardiff.

The amount you can borrow will typically be determined by various factors, including your income and additional costs such as rent.

Pros & Cons of Shared Ownership in Cardiff

When considering a Shared Ownership Mortgage in Cardiff, it’s essential to weigh the pros and cons. It’s important to note that, as previously mentioned, not all mortgage lenders extend their services to applicants using the Shared Ownership Scheme.

However, there are numerous mortgage lenders, including those within our panel, who do offer these types of mortgages. Additionally, Shared Ownership Mortgages in Cardiff can provide a sense of long-term stability, as you become both an owner and occupier simultaneously.

Deposits can be a stumbling block for many homebuyers, given the challenge of saving a substantial sum. Fortunately, Shared Ownership Mortgages typically require lower deposits compared to open-market purchases. This accessibility aspect makes mortgages more attainable for individuals with modest incomes.

While these advantages are notable, it’s important to keep in mind that you are responsible for 100% of the ground rent and service charges on your property, regardless of the share you have purchased. A feature called “staircasing” typically allows you to gradually acquire more shares over time, ultimately reaching 100%.

Upon achieving full ownership, you will no longer be obligated to pay rent, but your mortgage, ground rent, and service charges will persist. However, when your owned share surpasses 80%, you may be subject to Stamp Duty on the entire property value. It’s worth noting that this land tax might not apply in the case of a first-time purchase.

Despite potential Stamp Duty costs, monthly mortgage payments are often more affordable than traditional mortgages, and in some cases, even cheaper than private rent.

Additionally, Shared Ownership offers tenure security, ensuring you can remain in your home for the duration of your lease, which typically spans between 99 and 125 years.

As your home is jointly owned, you will need permission from the housing provider before making any structural alterations. This requirement may affect the sense of autonomy you would have if you owned the property outright.

Can I sell my home if I have a Shared Ownership Mortgage in Cardiff?

Should you decide that homeownership is no longer the right fit for you and you wish to sell your property in order to relocate, the process differs somewhat with a Shared Ownership Mortgage in Cardiff.

While selling a property with most other mortgage types is typically straightforward, provided your fixed period has concluded, Shared Ownership entails a unique approach.

The feasibility of selling your property with a Shared Ownership Mortgage in Cardiff hinges on the proportion of the property you own in shares. Generally, you will need to possess 100% ownership of the property before considering a sale.

It is important to understand that the housing association typically holds ‘first refusal’ rights for the initial 21 years following your property purchase. This legal provision grants them the prerogative to make an offer to acquire the property themselves before you proceed to place it on the open market.

If you do not hold 100% ownership of the property, the initial step would be to explore the acquisition of the remaining shares of the property, subsequently allowing you to contemplate its sale.

Is Shared Ownership in Cardiff right for me?

Shared Ownership in Cardiff offers a promising opportunity for first-time buyers with aspirations of stepping onto the property ladder, particularly when their deposit may be on the smaller side. This mortgage scheme can serve as a valuable tool in realising your homeownership goals.

However, it’s important to acknowledge that embarking on a Shared Ownership Mortgage journey can be intricate, involving various fees and contractual nuances. To ensure you’re adequately prepared and well-versed in the contractual particulars, it’s essential to be thorough and well-informed.

Ultimately, the decision revolves around personal preference and your specific circumstances. By scheduling a complimentary mortgage appointment with a reputable mortgage broker in Cardiff, you can engage with a trusted mortgage advisor and adequately prepare if you’re contemplating this route.

For an in-depth understanding of the Shared Ownership Mortgage Scheme, you can explore further information on the government’s OwnYourHome website.

Date Last Edited: December 6, 2023