Sharetobuy (An Ultimate guide)
In this brief guide, we will discuss the Sharetobuy scheme, the eligibility criteria and how to get a Sharetobuy mortgage.
What is the Sharetobuy scheme?
The Sharetobuy scheme is a first time buyer scheme which allows first time buyers and previous homeowners who cannot afford to purchase in any other way to buy a minimum 25% share in any eligible Sharetobuy home provided by a Sharetobuy home provider.
You will then have to pay a subsidized rent to the Sharetobuy provider (usually a housing association) on the remaining share of the property but you can always increase the shares you have in the property through a process known as staircasing. You can usually staircase all the way to 100% and hence own the property outright. Whenever you want to staircase the value of the home will be independently verified.
With the Sharetobuy scheme you can either buy new build homes or Sharetobuy resales which are Sharetobuy homes which were previously owned by another eligible buyer.
You will also need to repay a mortgage on the shares of the property which you own. You can see what this may look like by using a Sharetobuy calculator.
Because you will need a mortgage for the share of the property which you will own you fill find that the mortgage deposit requirement is significantly less than usual. Sharetobuy mortgages are currently provided by Barclays, Lloyds TSB, Halifax and Santander.
Sharetobuy properties are always leasehold properties so there may be other charges involved such as ground rent etc.
Sharetobuy Priority applicants
Priority for Sharetobuy is given to applicants who are:
Armed Forces personnel (serving military personnel and former members of the British Armed Forces discharged in the last two years) and/or
those who live or work in the local area
The criteria may vary across each housing provider and development.
The scheme operates in Wales as the Sharetobuy in Wales and in Scotland as the Sharetobuy in Scotland. In Northern Ireland, it operates as the co-own scheme by co-ownership.
Should you buy a Sharetobuy home?
Yes, there are many reasons why you should consider buying a Sharetobuy home. We have compiled a list of pros and cons of the Sharetobuy scheme but we will provide you with a few reasons why you may want to consider buying a Sharetobuy home.
- If you currently cannot afford to save up the full mortgage deposit needed for a normal home then a Sharetobuy may be the best choice for you as you don’t need to save for a mortgage deposit which will qualify you for the full share of the home due to the fact that you are only buying a share of a home.
Example: If you wanted to buy a £500,000 home and needed just a 5% mortgage deposit you will need to put down a mortgage deposit of £25,000 which may be very difficult for you.
If the £500,000 home was a Sharetobuy home then you will simply need to buy a minimum share of 25% of this home which is £125,000% and a 5% mortgage deposit requirement will now be £6,250.
- You can get better mortgage rates with a Sharetobuy. The reason why you can get better mortgage rates with a Sharetobuy home is comparative to if you had to put down your mortgage deposit on the full price of the home. When you only have to put it down on a smaller share of the home you may be able to significantly reduce your loan to value and hence the mortgage rate being charged.
Example: if you had a mortgage deposit of £10,000 and wanted to buy a house with £200,000 hence a 5% mortgage deposit you will have a loan to value rate of 95% which will mean you will face some of the mortgage lenders most expensive rates as you have a high loan to value.
If you only needed to buy 25% of the £200,000 home through Sharetobuy which is £50,000 then your mortgage deposit of £10,000 will now get you a loan to value rate of 80% which may qualify you for cheaper mortgage rates.
- The rent charged on the property is subsidized. This means it is usually less than the market rate being charged. The rent on Sharetobuy properties is usually around 2.75% of the property value per annum.
- The mortgage deposit you need is usually 5% of the shares of the property you want to buy not the whole property.
- You can now pay your stamp duty based on the shares you own and be eligible for first-time buyer stamp duty relief. You may also be able to defer stamp duty until your share of the property reaches 80%.
- The minimum share of the property you need to buy is usually 25%.
- Due to the way the planning permission works (by requiring most developments to cater for Sharetobuy units) you may find Sharetobuy properties in some of the best Lindon postcodes.
Sharetobuy eligibility requirements
As with any other government scheme the Sharetobuy eligibility requirements are there to ensure that the benefits of the scheme are mainly received by those who are eligible.
To be eligible for the Sharetobuy scheme you must:
be at least 18 years of age
Not be in any mortgage or rent arrears
Have a good credit history and not have issues such as county court judgements, bankruptcies, home repossessions, defaults, missed credit repayments, individual voluntary agreements etc
have a minimum 5% for your mortgage deposit
not be able to afford the monthly mortgage repayments and other regular costs of buying a home such as home insurance., council tax etc
Not be able to find a suitable affordable home which meets your needs on the open market
Not have a household income of more than £80,000 if you live outside of London
Not have a household income of more than £90,000 if you live inside of London
be a first time buyer but if you currently own a home you should be in the process of selling it.
have savings of at least £4,000 which cover the initial costs of buying a home.
Some Sharetobuy providers (such as housing associations) will have their own Sharetobuy eligibility criteria but the above are the minimum requirements. You should check with the Sharetobuy provider to ensure you meet their eligibility requirements.
FAQs about Sharetobuy eligibility
Below we answer some of the most frequently asked questions about the Sharetobuy eligibility.
Can you get a Sharetobuy home if you are self-employed?
The Sharetobuy scheme does not place any limitations on people who are self-employed but you will need to ensure you are able to qualify for a Sharetobuy mortgage as mortgage lenders typically place greater emphasis on verifying a self-employed borrowers income.
You may want to consider using a self-employed mortgage broker who will have experience of the mortgage lenders who are willing to lend to you.
Is there a max income requirement for Sharetobuy eligibility?
Yes there is a maximum income requirement for the Sharetobuy scheme.
If you live within London your annual household income cannot exceed £90,000.
If you live outside of London then your annual household income cannot exceed £80,000.
When defining household income this refers to any member of your household who will be involved in the purchase of the property.
I am on benefits can I get a Sharetobuy?
If you are currently on benefits you should know that the benefits you receive will not be taken into account when calculating your ability to afford the Sharetobuy property by the Sharetobuy housing provider. This may make it harder for you to get a Sharetobuy if most of your income is generated from benefits.
I have bad credit, can I get a Sharetobuy property?
If you have bad credit then it is likely you may be able to get a Sharetobuy property but your cases will be looked at to determine if you are eligible based on your circumstances.
You may struggle to get a Sharetobuy mortgage and most share ownership housing providers will run a credit check on you when assessing your application.
I own a home can I get Sharetobuy?
If you already own a home then you must be in the process of selling your home for you to be eligible for Sharetobuy.
You will also need to show that the home you currently have is unsuitable for you and the property which is suitable for you is unaffordable without the Sharetobuy scheme. You will usually need a written letter from your council supporting your claim.
The Sharetobuy provider (housing association) which you are buying your property from will help you obtain this letter from the council and keep a record of it.
I am married but I only want my name on the mortgage?
If you only want your name on the mortgage this is fine but the Sharetobuy housing provider will likely carry out an assessment of your household income to see if it is a deliberate attempt to get a Sharetobuy when your wife or husband’s income will push you above the maximum annual household income requirement.
If you pass these checks you should be aware that only one name would be on the mortgage and on the lease.
I don’t have indefinite right to remain in the UK- can I get Sharetobuy?
Most mortgage lenders will require you to have at least 24 months left on your current visa before they will grant you a Sharetobuy mortgage. They may also place a higher mortgage deposit requirement of 25%+ on you
As long as you pass the mortgage affordability checks and financial assessment checks from the housing provider you will be able to buy with Sharetobuy.
Is there a minimum income for Sharetobuy eligibility?
No, the Sharetobuy scheme does not have a minimum income requirement but you will be accessed by the Sharetobuy housing provider as well as the Sharetobuy mortgage provider to see if you can afford to buy and maintain a Sharetobuy home.
Can you get the Sharetobuy if you are not a UK or EU citizen?
If you are not a UK or EU citizen you will still have to meet the Sharetobuy eligibility requirements but you must also be accepted for a Sharetobuy mortgage and different mortgage lenders have different criteria on which they assess none UK or EU citizens.
As long as you pass this criteria you should be fine.
In practice, most mortgage lenders require none UK and non-EU citizens to have lived in the UK for at least 36 months.
How to buy a Sharetobuy home
Buying a Sharetobuy home may seem like a long and stressful process but it is usually worth it.
Check you are eligible
Before you start the buying process you should check that you are eligible for a Sharetobuy home. As mentioned prior, some housing associations will actually set their own eligibility criteria upon those set by the Government. You should, therefore, check with the housing association of housing providers to ensure you meet their requirements.
Get a mortgage in principle
The next thing you will want to do is get a mortgage in principle for a Sharetobuy mortgage. A mortgage in principle will let the housing provider know that you are a serious candidate and that you can afford a mortgage.
Find a Sharetobuy home
You should now search the market to see which Sharetobuy homes you like. There are many portals including Rightmove which display Sharetobuy properties. Once you find a property you like contact the housing provider and they will invite you to a financial assessment.
They will use a calculator provided by the Homes and Communities Agency to assess what share in the property you can afford to purchase. This is usually only done for new build properties.
If you are trying to buy a Sharetobuy resale property then you will generally need to buy out the current owners share at the very minimum based on the current property value.
At the end of the assessment you will know how many shares you will buy in the property and how much rent you will likely pay. This will allow you to go get a mortgage offer from a Sharetobuy mortgage lender.
You can see what your mortgage options could be by using a mortgage calculator or a Sharetobuy mortgage calculator.
If getting a mortgage offer sees a daunting task then you can use a Sharetobuy mortgage broker to help you get a mortgage offer.
You will need a conveyancer (solicitor) who will carry out the legal work on the property to ensure there are no major issues which you should be concerned about e.g new developments nearby which may risk your properties value etc
There are conveyancers who specialise in Sharetobuy.
Once the financial assessment is done you would have also received a memorandum of sale through your solicitor. This document states the details of your purchase.
Once you have your mortgage offer and have agreed on the sale with the housing provider you can then exchange contracts with the housing provider. At this point you are now legally bound to the sale and backing out will likely cost you.
You will also set your ‘completion date’, or find out when your ‘completion on notice’ would be if you have bought an off-plan property.
On the day of completion, the Sharetobuy mortgage lender will give your conveyancer the mortgage funds for the mortgage you took out. Your conveyancer will then pay the housing provider with these funds. If it is a Sharetobuy resale then these funds will then be sent to the current homeowner.
You are now the owner of a Sharetobuy property. You should arrange to pick up your keys, set up your electricity and gas accounts and redirect your post. You can do this with the royal mail redirection service.
Examples of some of the most desirable Sharetobuy properties
Below are some of the examples of desirable Sharetobuy property
Royal Arsenal Riverside
1 – 3 bedroom homes for sale in 2 Thunderer Walk, Greenwich, SE18 6NS
L&Q @ Acton Gardens
1 – 2 bedroom homes for sale in Newton Avenue, Ealing, W3 8AJ
2 bedroom homes for sale in Mast Streert, Barking and Dagenham, IG11 7FY
Liberty at Crossharbour
1 – 3 bedroom homes for sale in 7 Limeharbour, Tower Hamlets, E14 9NQ
The Waldrons – Sharetobuy
1 – 2 bedroom homes for sale in 34 THE WALDRONS, Croydon, CR0 4HB
Dockside at Millharbour
1 – 2 bedroom homes for sale in 41 Mastmaker Road, E14 9XS, E14 9XS
The properties above may no longer be available so check with the housing providers before proceeding.
The pros and cons of Sharetobuy
Pros of Sharetobuy
Sharetobuy allows you to get on the property ladder as an owner-occupier, offering long-term stability without overstretching yourself.
The mortgage deposit requirement is much less as you only buy a share of the property.
The Sharetobuy mortgage is much easier to get as it is usually a smaller mortgage size than normally required.
You can sell your shares at any time.
You can staircase at any time
You get to pay subsidized rent
Some of the Sharetobuy homes are in very good locations
You don’t have to pay stamp duty upfront and if you do you qualify for the first time buyer relief if you are eligible.
You can sell the property when you want
You can live in the property for as long as you want
You can decorate the house as you please but anything that might alter the value of the property such as home improvements should be approved by the housing association or property developer who owns the rest to ensure they agree.
The Sharetobuy scheme is not exclusively run by the Government but by Banks and building societies as well.
The Sharetobuy scheme is not unique to those on housing benefits or council tenants.
Anyone can purchase a Sharetobuy home as long as you earn less than £80,00 outside London(£90,000 in London) and don’t own a property.
Sharetobuy does not mean you share your home with another person. Sharetobuy does not mean this but rather it means that you share the ownership with your landlord, this could be a bank, housing association or a company. You can then buy bigger shares in your Sharetobuy property by a process called staircasing.
Sharetobuy can allow 100% ownership or not:
You are not required to buy out your landlord’s share in the property. You can simply own your shares and continue paying rent on the rest for as long as you want without any restrictions. The other option is of course that you slowly buy out your landlord’s share of the property. Be aware that you buy your landlords shares at market value so timing the market might be the best chance of you getting a discount.
Cons of Sharetobuy
Sharetobuy mortgages may be harder to find as there are very few mortgage lenders who offer them. This means the mortgage rates may also not be very competitive.
Once you reach 80% ownership you would have had to pay stamp duty on the whole value of the property but this has now been phased out and you can now make proportional stamp duty payments.
All Sharetobuy properties are leasehold properties. You may be able to convert the home to a freehold after buying 100% of the shares in the property.
You have to pay rent on the percentage of the property you don’t own.
You will also have to pay a monthly service charge and ground rent as you will do in a lease.
You will also be able to sell your share of the property but of course, you will still benefit in any rise in property value since you bought it.
Your housing association or property developer might place restrictions on how and when you can purchase extra shares in your Sharetobuy home.
You can’t just sell the property to anybody, the person must be approved by the Sharetobuy scheme.
You won’t be allowed to rent or sub-rent your Sharetobuy home.
Increasing your ownership can be costly because you essentially have to get another mortgage to cater for the cost of buying more shares in the property. The mortgage fees as well as other costs you need to put into consideration when staircasing can amount to a lot.
You might be liable for further stamp duty, Solicitor costs (These will prove essential to understand your current obligations and then amend the agreement once the staircasing is complete) and valuation costs(You will need to get a property valuation from a qualified surveyor registered with the Royal Institute of Chartered surveyors)
It might be difficult to sell your property due to it being a shared housed home. Your housing association or property developer will likely have the right of first refusal on your property (even if you have purchased 100% of the property). This will insist you wait a certain period of time for them to find a buyer before you can sell it on the open market.
You could also face being in a position of negative equity as new homes usually include an extra premium on the sale price. If house prices fall, you may fall into negative equity.
You don’t have greater protection under Sharetobuy
Your rights have not increased due to Sharetobuy so make your payments on time and follow the terms of your agreement.
From 21years since you got 100% ownership of the property, the housing provider may have the first right of refusal if you want to sell.
Frequently asked questions about the Sharetobuy scheme
Below are some of the most frequently asked questions about the Sharetobuy scheme.
Can I take a lodger or sublet my Sharetobuy house?
No, you cannot sublet your Sharetobuy usually but you should clarify this with your housing provider as there may be some circumstances in which they will allow you to take a lodger or sublet. You must get written approval from your housing provider before taking in a ledger or subletting the property.
Most Sharetobuy leases should allow you to take a lodger but you should still check with your housing provider. You won’t be able to use the income from taking in a lodger when doing your financial assessment for a Sharetobuy home.
I am over the age of 55, can I use Sharetobuy?
Yes, for people aged over 55 there is the old people Sharetobuy which may be very beneficial to you. It works in the same way as the typical Sharetobuy but you can only buy up to 75% of your home.
Once you have purchased 75% of your home you won’t have to pay rent on the remaining 25% share.
Can I purchase any home with Sharetobuy basis?
No the home you want to purchase must be listed as a Sharetobuy home and provided by a registered provider.
Can I increase my share in my Sharetobuy property to 100%?
Yes, you can increase your Sharetobuy holding to 100% but you should be aware that different housing providers may have varying criteria for how you can do this so be sure to check with them. Some housing providers may cap the limit to which you could staircase to e.g 95%. This Is Known as staircasing. You may need another mortgage for whenever you staircase so consider all the costs involved.
Usually you will need to staircase with a minimum of 10% of the outstanding shares being purchased at any one time.
When you staircase you’ll be buying new shares based on the current price of the home. The home will be independently valued.
Does Sharetobuy mean sharing with another person?
No Sharetobuy does not mean that you have to share the home with another person.
It simply means that you buy a share of the property and pay subsidised rent on the other shares of the property.
How many bedrooms can I purchase?
With a Sharetobuy home there is no restriction on how many bedrooms you can purchase.
What is a resale Sharetobuy property?
A resale Sharetobuy property is property that was recently owned by someone else.
Unless they are ‘fixed equity’ you will have to purchase the shares on offer and can then purchase more shares if you wish.
How long does it take to get a property via Sharetobuy?
It can take as long as 2 months to get a home on Sharetobuy but this is dependent on many factors such as how long it takes you to get a mortgage offer and if the building is an off-plan property or not.
Can I decorate my Sharetobuy home?
Yes you can decorate your home but if you want to make major changes you should seek the permission of the housing provider.
What shares can I purchase in a Sharetobuy property?
You will usually need to purchase a minimum 25% of the available shares in the property but some housing providers may have a much higher limit.
When purchasing a Sharetobuy resale you will usually have to purchase the amount of shares the previous owned had at the very minimum.
What is a Sharetobuy lease?
A Sharetobuy lease is a document which sets out your rights as a leaseholder. It also sets out the rights and obligations of the landlord.
The housing association has a contractual right to ensure that the shared owner complies with the terms of the lease. A Sharetobuy lease is where the leaseholder has purchased a share in the equity and pays rent on that share retained by the landlord.
What shares can I purchase in a Sharetobuy property?
This is all dependant on the housing provider but the minimum amount of shares you can initially purchase is 25% as defined by the UK government. Some housing providers may have a higher threshold than this.
Who pays for the repairs of my Sharetobuy home?
You are responsible for paying for the repairs to your Sharetobuy home. Most new homes will have a 1-year warranty but some may even have a 10-year warranty. These are things you should check for if you are concerned with rising costs. The warranty will usually cover defects and any structural problems.
You won’t have to pay for repairs on the communal parts of the building as it is a leasehold and this is the responsibility of the freeholder. The service charge you pay for your leasehold will be used to cover the cost of any communal repairs.
Alternatives to the Sharetobuy scheme
Aside from the Sharetobuy scheme there are also various first-time buyer schemes which you may be eligible for. These schemes could help you get on the property ladder quicker.
These government schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy– allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire- same as above but for housing associations.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
How do I apply for Sharetobuy?
Where you go to apply depends on where you want to buy within the UK.
- If you are looking in England, you will find properties for sale at Property Booking.
- If you are buying within London specifically, Homes for Londoners offers a variety of affordable housing options.
- If you are buying in Scotland, visit the Scottish Government’s website.
- If you are buying in Wales, you will need to speak directly the relevant housing association.
- If you are buying in Northern Ireland, visit this website.
Using a Sharetobuy mortgage broker
You may want to consider using an independent mortgage broker to get a mortgage.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide we have discussed the Sharetobuy scheme. If you have any comments or questions please let us know below.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.