Using Shared Ownership in Retirement

A number of people who each retirement do not feel comfortable or do not want the financial commitment of owning a home. It may be that you have lived in your own home for many years and want to downsize or free up some cash for your retirement.

Many retirement villages and private developers are offering shared ownership schemes which allow you to buy just a portion of the property and pay rent on the remainder at a reduced rate.

Who Can Use Shared Ownership?

Shared ownership in retirement is usually limited to those who are at least 55 years of age, although some schemes will specify 60. If you are a couple only one of you will need to be the correct age.

Ideally you should have enough capital to buy your share of the property outright. For example, if the property is worth £100,000 and you want to buy a 60% share you will need to pay £60,000. You can raise the money by either selling your current property or taking out a mortgage. Some mortgage lenders will offer shared ownership mortgages into retirement but it is quite rare for them to do this and you will need to prove your income and prove you can meet your mortgage payments.

How It Works

Most local housing authorities will have lengthy waiting lists for shared ownership properties. It is a good idea to speak to your local housing authority about shared ownership a number of years before you plan to move.

Each local authority has a certain number of properties they can offer on a shared ownership basis. There are also some private housebuilders and developers that will offer shared ownership properties.You will need to apply for shared ownership through your local housing authority.

You will have to prove that your income or your joint income does not exceed £60,000 a year, but this is normally not a problem for retirees.

You will be given the option of buying a stake in the house, for example a 25%, 50% or 75% stake. Shared ownership in retirement differs from shared ownership for first-time buyers because you will never be allowed to buy 100% of the property. After one year though you can increase your stake if your wish.

The higher your stake the less you will pay in rent. The rent you do pay should be affordable and at a reduced rate. Rents will vary, but you will roughly pay a rent of around 3%.

Normally when you are offered a shared ownership deal the housing association will offer you a lease of around 99 years. Once you decide you want to move out of the property they will firstly offer it to someone on their waiting list, before allowing you to sell independently.

How it Differs from Normal Shared Ownership

Shared ownership in retirement is usually offered on properties that have been designed for those in retirement and will include features such as a 24 hour security guard on site. Many of the properties for shared ownership will be flats in a block of other retirement properties or houses in a retirement village.

The Benefits of the Scheme

• Buying on a shared ownership basis means you will benefit from any increase in property prices but will also pay a reduced rent.
• Although many homes will cater for retirees, shared ownership homes will expect you to maintain an independent style of living, so you still get your freedom and independence.
• If you are downsizing from a larger property you will have freed up some cash which will allow you to not only pay your rent but also enjoy your retirement a lot more.
• Shared ownership also allows you to live somewhere larger than you would normally be able to afford.

Drawbacks of the Scheme

• You may need to ask permission to carry out any renovation work.
• There are only a limited number of properties available for shared ownership.
• You will never be able to buy 100% of the property.

Shared ownership is an ideal option for many in retirement because it gives you the best of both worlds. In some ways your options will be limited with shared ownership because of the properties that are available, but in other ways you will have more options open to you because you will have freed up some of your cash by only owning part of the property.