What is the Older Persons Shared Ownership (OPSO) Scheme?
- The Older Persons Shared Ownership (OPSO) scheme is a government-backed initiative designed to help people aged 55 and over buy a share of a home.
- You buy a share of a property (typically between 25% and 75%) and pay rent on the remaining share to a housing association.
- You can increase your share over time (known as "staircasing"), potentially owning up to 75%. Once you reach 75% ownership, you stop paying rent on the remaining share held by the housing association.
- In 2022-2023, a whopping 68% (Source: Gov.UK) of Shared Ownership purchases were made by people under 40. If you're over 55 and looking to buy with this scheme, the timing has never been better.
How is the OPSO scheme different to Shared Ownership?
Both OPSO and standard Shared Ownership offer a way to buy a share of a property and pay rent on the remaining portion, there are key differences that make OPSO specifically tailored for older individuals. The primary distinctions are:
Age criteria
Standard Shared Ownership is generally available to first-time buyers, former homeowners who cannot afford to buy on the open market, and some existing social tenants. There is no specific age restriction.
OPSO, on the other hand, is exclusively available to people aged 55 and over. This focus on older individuals means the scheme caters to their needs and circumstances rather than a broader set of people.
Maximum share of ownership
In standard Shared Ownership, it's usually possible to staircase up to 100% ownership of the property. With the OPSO scheme, the maximum share you can own is 75%.
This difference reflects the understanding that older individuals may have different financial priorities and may not necessarily aim for full ownership. Once you own 75% of the property, you will no longer pay rent on the remaining 25%.
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Pros and cons of Older Persons Shared Ownership
Affordability
OPSO makes homeownership more accessible by requiring a smaller mortgage and deposit compared to buying a property outright. This can be particularly beneficial for those on a fixed income.Flexibility
You have the option to staircase and increase your ownership share over time, giving you control over your housing costs.No rent after 75% ownership
Once you own 75% of the property, you stop paying rent, significantly reducing your monthly outgoings.'Extra care' services
Some OPSO properties are located within 'extra care' schemes, offering on-site support services such as personal care, meals, and social activities. This can be beneficial for older individuals who may require additional support.Inheritance for beneficiaries
Your share of the property can be passed on to your beneficiaries as part of your estate.
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Mortgage and rent payments
Until you reach 75% ownership, you will be responsible for both mortgage and rent payments, which is a significant financial commitment. The mortgage payments will reflect the share that you currently own, whilst the rent payments reflect the housing association's share. -
No full homeownership
With OPSO, you will never own 100% of the property. This means you won't have the same level of control as a full homeowner. -
Property price rises
If property prices rise, the cost of staircasing will also increase, making it more expensive to buy additional shares. -
Resale challenges
Selling a shared ownership property can sometimes be more complex than selling a freehold property, due to leasehold restrictions and the involvement of the housing association. -
Subletting restrictions
You are typically not allowed to sublet your shared ownership property.
Am I eligible for over 55 Shared Ownership?
To be eligible for the Older Persons Shared Ownership (OPSO) scheme, you must meet certain criteria. These typically include:
Age
You must be aged 55 or over. This is the fundamental requirement for OPSO and there aren't any exceptions.
Income
Income caps are in place to ensure the scheme is available to those who need it most. Currently, your total household income must be no more than £90,000 per year in London and £80,000 per year outside of London.
For example, a retired couple receiving a combined annual pension income of £75,000 would likely be eligible for OPSO outside of London, provided they meet the other criteria. However, a single person earning £95,000 in London would not be eligible.
Homeownership status
You generally cannot already own a property. The OPSO scheme is designed to help those who are unable to purchase a home on the open market. However, there are exceptions in certain circumstances:
If you are going through a divorce or separation and need to move out of a jointly owned property, you may be eligible for OPSO even if you are still technically a homeowner. For example, if a couple is divorcing and neither can afford to buy the family home alone, one or both parties (if over 55) could explore OPSO to secure independent housing.
If your current home is no longer suitable due to disability and requires significant adaptations that are not financially feasible, you may be eligible for OPSO or HOLD (Homeownership for people with Long-term Disabilities) even if you own your current property.
For example, if an older person's mobility has declined significantly and their current home has stairs they can no longer manage, OPSO could enable them to move to a more accessible property.
Financial circumstances
You'll need to demonstrate that you can afford the mortgage and rental payments. Lenders will assess your credit history and financial situation to determine your affordability.
A poor credit history, such as County Court Judgments (CCJs) or defaults on previous loans, can make it difficult to secure a mortgage for OPSO. Lenders view these as indicators of higher risk. For example, if someone has a recent CCJ for unpaid credit card debt, a mortgage lender may be unwilling to lend to them, even if they meet the other OPSO criteria. They may need to take steps to improve their credit score before applying.
Lenders will also conduct an affordability assessment to ensure you can comfortably manage the monthly mortgage and rent payments. This involves looking at your income, outgoings (including existing debts), and living expenses. For instance, even if someone has a good credit history, if their monthly outgoings are very high relative to their income, a lender may deem them unable to afford the OPSO payments.
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How to staircase with Shared Ownership for over 55s
"Staircasing" is where you buy additional shares of your OPSO property. This allows you to gradually increase your ownership stake and reduce the rent you pay on the remaining share. With OPSO, you can staircase up to a maximum ownership of 75%. Once you reach this threshold, you will no longer be required to pay rent on the remaining 25%.
Here's how staircasing typically works:
Shared Ownership staircasing valuation
An independent valuation of your property. This determines the current market value, which is used to calculate the price of the additional shares you want to buy.
Purchase of additional shares
You can usually purchase additional shares in stages of at least 10%, although some housing associations may allow smaller percentages. The price you pay for the additional shares is based on the property's current market value.
Legal and administrative costs
There are legal and administrative costs associated with staircasing, such as solicitor's fees and valuation fees. These costs should be factored into your decision to go ahead with the additional share purchase.
It's important to note that as property prices rise, the cost of staircasing will also increase. Therefore, it's often more cost-effective to staircase sooner rather than later if you have the financial means. You should contact your housing association for details on their staircasing process and any associated fees.
OPSO Scheme costs
Let's imagine a two-bedroom house with a £400,000 market value. An individual aged 60 decides to purchase a 50% share of the property.
- Property Value: £400,000.
- Initial Share Purchased: 50% (£200,000).
- Mortgage Required: £160,000 (assuming a 20% deposit of £40,000).
- Rent on Remaining Share (50%): This will vary depending on the housing association and the specific property, but let's assume it's £500 per month.
Example of monthly costs - Shared Ownership for over 55s
Type of Cost | Description | Cost |
|---|---|---|
Type of Cost Mortgage repayments | Description This is the monthly payment you make to your lender for the loan used to purchase your share of the property. The amount depends on the interest rate and terms of your mortgage. | Cost In our example, a £160,000 mortgage at a 5% interest rate over 25 years would result in monthly payments of approximately £930. |
Type of Cost Rent payments | Description This is the monthly payment you make to the housing association for the share of the property you don't own. The rent is usually calculated as a percentage of the unsold share's market value. | Cost In our example, we assumed £500 per month. |
Type of Cost Service charges | Description These charges cover the costs of maintaining communal areas and providing services within the development. | Cost In our example, we estimated £100-£200 per month. |
Type of Cost Insurance | Description In most cases with Shared Ownership, the housing association is responsible for building insurance, and the cost may be included in the service charge. This covers the cost of repairing or rebuilding the structure of the building in case of damage (e.g., fire, flood). | Cost You are responsible for contents insurance which could set you back £10-£20 a month. |
Type of Cost Ground rent | Description Ground rent is a fee paid to the freeholder of the land on which the property is built. It's more common in leasehold properties. However, ground rent is not payable on new leases granted after 30th June 2022 for OPSO properties. | Cost N/A |
Type of Cost Total | Description This is an estimate of your total monthly costs associated with an OPSO scheme home. | Cost £1,560-£1,695 per month (estimated) |
Other costs to consider
- You'll need a deposit for your mortgage, typically between 5% and 10% of the share you are buying.
- Solicitor's fees for the legal work involved in buying the property and registering ownership.
- When you staircase, you'll need to pay for a property valuation.
- Stamp Duty Land Tax (SDLT) may be payable depending on the share you purchase and the current stamp duty thresholds.
- Get up-to-date property tax advice on SDLT, CGT, IHT, personal vs partnership vs company structure.
- Free 15-minute initial consultation with a qualified accountant from our panel of tax advisors.
- Ask your tax questions and get guidance on what you can do next.
- If further accountancy work is required, you'll be quoted for this as a separate piece of work with no obligation to purchase.
How do you apply for the OPSO Scheme?
Contact housing associations directly
The first and most important step is to identify housing associations and estate agents that offer OPSO properties in your desired area. Contact them directly to inquire about available properties, eligibility criteria, and their specific application process.
You can find this information by searching online for "housing associations [your area]" or by contacting your local council, which may have a list of registered providers.
Financial assessment
You'll need to undergo a financial assessment to determine how much you can afford to borrow. This will involve providing information about your income, outgoings, and credit history. It is highly recommended to seek independent financial advice at this stage.
An independent mortgage broker specialising in shared ownership can assess your income, outgoings, credit history, and financial circumstances to determine how much you can borrow and what type of mortgage would be suitable. They can also help you find lenders that offer mortgages for OPSO.
Get a mortgage decision in principle
You'll need to apply for a mortgage from a lender that specialises in shared ownership. Your mortgage broker will help find a suitable product for you and your situation.
Find a suitable property
Once you've been assessed and know what you can afford, you can start looking for suitable OPSO properties. Keep in touch with the housing associations you've contacted, as new properties become available regularly.
You can also check local authority websites for information on affordable housing schemes. While online property portals may list shared ownership properties, you need to confirm the details with the relevant housing association.
Instruct a solicitor
You'll need to instruct a solicitor to handle the legal aspects of the purchase. This includes: reviewing the lease, conducting searches, and ensuring the transfer of ownership is legally sound.
Reserve the property
Once you've found a property you like, you'll need to reserve it. This usually involves paying a reservation fee. The fee is typically refundable if the purchase doesn't proceed for reasons outside of your control.
Mortgage application
Once your mortgage application is approved, you'll receive a mortgage offer, which outlines the terms of your loan.
Completion
Once all the legal and financial checks are complete, you can complete the purchase and move into your new home. This is often referred to as "exchange of contracts" and "completion."
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