Buying a home is a big cost. In fact, it’s one of the biggest costs most of us will face in our lifetimes. Shared ownership offers a stepping stone when searching for a house seems to lead to a dead end. Perhaps you haven’t considered shared ownership, or maybe you’ve never even heard the words before! We’re going to explore shared ownership and investigate the pros and cons to help decide whether it could be the correct option for you.
You may be a beginner when it comes to shared ownership, perfect- this article will tell you everything you need to know! Or maybe, you’re just looking for something specific. Either way, this list will help you gain an insight into what we’re going to explore:
Maybe shared ownership are completely new words to you and so a good place to start would be to find out what exactly is shared ownership. Shared ownership schemes are run by housing associations, giving first time buyers or those who don’t currently own a house the opportunity to purchase a share of a property. This share can be anywhere from 25% to 75%. The buyer must pay the housing association rent for the remaining percentage of the property. As the buyer is purchasing a percentage of the house, they only require a mortgage on their share, meaning the amount of money required for a deposit is a lot less than if the house was being bought outright.
Now we know the basics, let’s get into the shared ownership pros and cons…
Pros:
Cons:
Establishing whether you’re eligible for shared ownership is an important step in deciding if it’s right for you. You can use the below as a ‘check-list’ to see if you would be able to apply:
If you read that list thinking you tick all those boxes, then great! Shared ownership is definitely something you can consider.
How do I apply?
If you’ve decided shared ownership is the route you want to take, then you’ll be glad to know applying is quite simple. To apply, you need to contact your local council’s housing team to ask about housing associations nearby. Alternatively, you can visit websites such as the government’s help to buy page or websites like ‘Share to buy.’ You do need to keep in mind that not all mortgage providers offer mortgages for shared ownership and so having a mortgage broker on your side to get you the best deals is always a plus.
The good news is that selling a shared ownership property is pretty much the same as selling a regular property. However, unless you have ‘staircased’ to own 100% of the property there will be restrictions. If you want to sell your home and you don’t own 100%, you must give the housing association the option to find a buyer, before you put it on the open market. The good news is you will receive a share of the sale price, in line with the percentage that you own. To give you an example, if the property sells for £200,000 and you have a 50% share, you will receive £100,000.
If you’re only here for the short answer, yes you can! If you want more than a yes, this section has got you covered. A great part of shared ownership is that you can actually purchase up to 100% of the property, by a process known as ‘staircasing’. I told you I’d explain staircasing in more detail! Essentially, at any time during your tenancy you can increase your owned share of the property up to three times. For example, if you own 25% you could staircase to 50%, then 75% and finally 100%. Something you will need to bear in mind when it comes to staircasing, is you will buy the share at the current market value. When you decide you want to buy more of the property, your housing association will value it for you. You may also want to keep in mind that you will have to remortgage, should you choose to purchase more of the property.
Help to buy is another scheme put in place to provide help for those who can’t afford a home by themselves. The government will give you an equity loan of up to 20% (40% in London) of the cost of your new home. Both help to buy and shared ownership enable buyers to take their first steps on the property ladder. The main difference between the two is that in shared ownership, you’re paying both a mortgage and rent (to your housing association), and in help to buy you’re only paying mortgage. A shared ownership is initially cheaper as you’re only purchasing a share of the home, whereas in a help to buy you’re purchasing the whole house. Which scheme is better is down to personal opinion and depends on each situation. If you want to own the full property on initial purchase, then help to buy is the better option. If you don’t have the desire to buy the whole property initially, or it’s something you’d prefer to work up to, then shared ownership is more suited to you.
Whether shared ownership is a good idea is down to the individual and their personal situation, like I said earlier there’s no ‘one size fits all’. However, a scheme which is put in place to make purchasing a house more affordable, to me can only seem like a good idea. Getting onto the property ladder seems a daunting experience, which only looks increasingly difficult and by applying for a shared ownership scheme, buying a house is only going to get easier!
Millie is perfectionist with a passion for property and writing articles. You’ll find her researching the latest housing trends and the newest up and coming areas worth investing in. Read more about Millie here.
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