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Can't afford to buy a home? Try shared ownership instead

woman with housekeys Image copyright Thinkstock

Soaring house prices are putting millions of people off home ownership. Month by month the dream seems to get further out of reach.

But what if you could buy just part of a house - and rent the rest- until you could afford to buy the rest of it?

While the idea keeps the prospect of home ownership alive, and at least gets you on to the housing ladder, there are plenty of potential pitfalls too.

So what should you ask, and what do you need to know, if you want to consider "shared ownership"- where you and a housing association take joint responsibility for your home?

'Extra costs'

Matthew Yassin bought his flat in West London as part of a shared ownership scheme back in 2007.

He was delighted to be able to get on the housing ladder. He currently owns 65% of the property, and Notting Hill Housing Association owns the rest.

Now, though, he wants to sell. But he is finding that the process is not as straightforward as he had hoped it would be.

Image caption Matthew Yassin is frustrated by the selling process

The schemes are offered by various housing associations across the whole of the UK. Generally the properties are leasehold ones, so you will also be expected to pay a service charge.

In order to sell his share Matthew is reliant on the housing association for the first eight weeks. This period is known as the nomination period.

During this period, the housing association has the right to advertise the property and find the most suitable buyers for it. After the nomination period is over you can go to an estate agent to market your home.

"To sell a shared ownership property you find out, once you start the process, that you've got extra costs, which are through the housing association, because you've got to use their panel of surveyors which we have to pay for," says Matthew.

'Staircasing'

But Matthew's housing association claims that in around 80% of cases they have been able to sell the property within this initial eight-week period.

Image copyright Thinkstock

Andy Belton, chief operating officer at the Notting Hill Housing Association, also believes that the nomination period of eight weeks is a relatively short period and is not too restrictive on sellers.

"We do try to explain that it is slightly different to the open market when we sell shared ownership," he says.

"The fact is shared ownership has received public subsidy. So what we try to do is recycle it at the point of resale so that new first-time buyers have the chance to buy into that affordable housing as well."

Many clients of Notting Hill Housing also exercise the option of increasing their share in the property over time. This is called "staircasing".

The cost of increasing your share depends on the value of the property at the time. But you will need to pay for the housing association to carry out a valuation of the property and arrange a mortgage to buy the extra share.

Do I qualify?

As well as restrictions when it comes to selling a shared ownership property, there are also hurdles to overcome in order to buy one.

The National Housing Federation (NHF) is the trade body that oversees the various housing associations.

According to the NHF you qualify for a shared ownership scheme if you earn less than £60,000 a year. However, in London that figure is higher at £77,200 a year.

Typically you will own between 25% and 75% of the property.

By the end of 2012 around 200,000 people had been able to get on the housing ladder using shared schemes, and they have continued to grow since.

Paperwork

Rachel Fisher, head of policy at the NHF, thinks that there are some basic guidelines you should follow if this is the only way you think you will be able to become a home owner.

"The biggest and most important thing you need to do is read the paperwork. You need to read the contract. You need to have a lawyer, like any property transaction," she advises.

"You really need to get into the detail of what it is that is being expected of you as a leaseholder to the housing association, and also what kind of clauses there are in terms of being able to resell."

Ms Fisher also points out that it is worth checking on the reputation of the housing association beforehand.

"A lot of them have really good information on their websites where you can find out about the housing association, what its track record is like, and where probably you can find out from other customers what their experiences have been."

Matthew is keen to buy a bigger property next.

He still believes in the merits of shared ownership but he thinks it is vital to check all the details thoroughly before you commit.

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