Shared Ownership Scheme
The Shared Ownership Scheme was aimed at people who could not afford to buy their entire home in one go. It has now been stood down for new applicants. The rules of the scheme continue to apply for people who used it to start buying a home. An Incremental Purchase Scheme will provide another way for people on low incomes to start buying a home, subject to certain conditions.
Some borrowers are facing affordability issues with their Shared Ownership properties. Several measures have been developed to alleviate these difficulties. Contact your local authority for information about your options.
People who are buying Shared Ownership homes
You may increase the proportion you are buying at any time, either by adding to your mortgage or paying cash. You must buy the full ownership within 30 years. This does not mean that you have to repay all capital outstanding on the mortgage within the 30-year period. You may take out another mortgage to buy out the remaining share when the original mortgage is paid off.
You can sell the house or apartment at any time. The local authority will, of course, be entitled to claim the value of the proportion it owns at the time of sale. If it provided the house or apartment at a discount from the market value, you must refund a proportion of this discount, depending on how long you have lived in it.
Transactions under the Shared Ownership Scheme are exempt from stamp duty. Local authorities are also required to keep legal costs to a minimum.
If your home was in Shared Ownership with the local authority on the liability date for the Household Charge (1 January 2012), it was exempt from the Household Charge, as the local authority still retained an ownership stake in the property. Your home did not have to be registered in order for you to claim the exemption.
How the scheme worked
The Shared Ownership Scheme allowed people to start by buying a proportion of a home, increasing that proportion in steps until they owned it all, and with ownership shared between the buyer and the local authority. Buyers would make payments on a mortgage for the part being purchased and pay rent to the local authority for the other part at a rate of 4.3%.
To avail of the scheme, you had to:
- Get approved in principle for shared ownership by the local authority
- Identify a new or existing house or build a new house (some local authorities also had homes for sale under the scheme at a discount).
- Ensure that the home was suitable for your needs, met certain minimum standards and was acceptable to the local authority.
If the local authority was satisfied that you could afford the mortgage repayments and the rent, it would buy the house or apartment and grant you a shared ownership lease. From the start, you had to buy at least 40% of the house or apartment.
Upper limits for purchasers
Some local authorities operated an upper limit on the amount that could be borrowed under the scheme. This amount varied, depending on the location of the property and the local authority involved.
Local authorities could also set a maximum percentage of income that could be apportioned to rental/mortgage payments. In each case the long-term viability of the mortgage/rental payments was the key concern.
To qualify for the Shared Ownership Scheme you had to be:
- In need of housing and your income satisfied the income test below, or
- Registered on a housing waiting list with a local authority, or
- A local authority tenant or a tenant purchaser (if you wanted to buy a private house, you had to return your local authority house to the local authority), or
- A tenant for more than one year of a home provided by a housing association under the Capital Loan Scheme and you wanted to buy a private house/apartment and return your existing house/apartment to the housing association.
The income test only applied to the first category; if you were covered by the second, third or fourth category, you were exempt from the income test.
You had to buy at least 40% of the price the local authority paid for the house/apartment.
The income test
- Single-income household: if your gross income (before tax) in the last income tax year was €40,000 or less you were eligible.
- Two-income households: multiply the gross income (before tax) of the higher earner in the last income tax year by 2.5. Add the gross income of the other earner in the last income tax year. If the answer was €100,000 or less, you were eligible.
Total monthly payment
This amount depends on the cost of the house, the proportion you are renting and current interest rates.
If your household income in the last income tax year was less than €28,000 per year, you could qualify for a rent subsidy of between €1,050 to €2,550 per year as long as the subsidy would not reduce the rent below €1 per week.
The local authority could waive the €1,270 deposit if:
- You were resettling in a rural area from a major urban area and
- You were giving up a local authority house or had been approved for local authority housing.