Shared Ownership affordability explained

Shared Ownership is an affordable, straightforward way for first-time buyers and eligible individuals over the age of 18 to get on the property ladder.

One of the key steps in the Shared Ownership process is assessing the affordability of candidates (like you!) looking to buy a share in their new home. This makes sure that those getting on the property ladder can comfortably afford things like their mortgage payments, rent, and service charges for the foreseeable future. 

As of 31st July 2024, Homes England made changes to the Capital Funding Guide which altered the way that mortgage lenders and budget advisors approach a Shared Ownership affordability assessment. Here’s everything you need to know, to make your journey towards Shared Ownership as smooth as possible.

How has Shared Ownership affordability changed?

One of the main changes that Homes England has made is to remove its Shared Ownership affordability calculator – previously used by many providers to assess the financial eligibility of candidates looking for their new home. 

Along with getting rid of the affordability calculator, Homes England has removed the 25% minimum share requirement. This sometimes caused applicants to overextend their finances to try and afford properties that weren’t comfortably within their budget. 

In its place, providers (such as Legal & General Affordable Homes) will be required to keep a record of any applicant’s Shared Ownership future budget sheet. 

For Shared Ownership properties in London, however, the previous assessment calculator is still in place. This means that rent, mortgage costs and service charges are assessed as a percentage of your net monthly income, minus personal credit commitments. The guideline is that these deductions should come to a figure no higher than 45% of your total income.

Using a budget planner during your Shared Ownership application

A budget planner will be one of the most important assets during your Shared Ownership affordability assessment stage, because it will allow you to have a clear idea of your finances to help you decide if Shared Ownership is right for you.

As part of the affordability assessment, a budget planner will help you to understand: 

– Future financial changes or considerations
– An adequate minimum monthly surplus to support saving, emergency funds etc. 
– Stress-tested rent fluctuations

What aspects of Shared Ownership affordability stay the same?

If you’ve done your research to find out more about your Shared Ownership affordability, you may be wondering if everything you know is set to change. 

To clarify, there are still some fundamentals that remain true – even after the changes that came into play on 31st July 2024.

Purchase the largest share you can comfortably afford

While the new Shared Ownership affordability criteria rejects the idea of ‘maximising’ your share, prospective owners are still required to purchase the largest share that is suitable for them. This is based on the above affordability considerations, which a budget planner and/or mortgage advisor will be able to work out with you. Plus, by maximising the share you purchase, you’re one step closer to owning your home outright.

It’s worth noting that Shared Ownership applications can be rejected if a potential buyer chooses to purchase a lower share than they could comfortably afford, with no rationale for doing so. 

Meet all of the eligibility criteria

While the way that affordability is approached has changed, the other eligibility criteria for Shared Ownership are still the same. This includes: 

• You must be at least 18 years old
• You cannot own another home. Shared Ownership purchasers are often first-time buyers but if you do already own another property (either in the UK or abroad), you must be in the process of selling it
• You must be able to demonstrate that you have a good credit history (no bad debts or County Court Judgements) and can afford the regular payments and costs involved in buying a home during your Shared Ownership credit check.
• Your annual income must not exceed £80,000 (or £90,000 if you live in London) 
• You must not be in rent or mortgage arrears

For a full breakdown of the eligibility requirements, check out our comprehensive explainer or reach out to a member of the Shared Ownership team today. 

Make use of our Shared Ownership affordability calculator 

If you’re early in the process and want to know a rough guide on how much you can afford, then our Shared Ownership affordability calculator is a great place to start. 

By inputting information like the property’s value and the kind of deposit you’re looking for, you’ll receive estimated costs for things like monthly rent and mortgage costs. While this information isn’t final, it does allow you to start thinking about your finances with Shared Ownership in mind. You can then browse our extensive range of homes to find the perfect location for you. 

Assess your affordability today