If you are a first-time buyer, it might be especially difficult for you to buy a property. Although Shared Ownership could be that helping hand for those who are unable to afford a home on their own, it’s not suitable for everyone. As always before making an important decision, we suggest weighing up all the pros and cons.
Shared Ownership Overview
Shared Ownership is a scheme that helps first-time buyers get on the property ladder and get a place to live for those who don’t own a home.
Sometimes, Shared Ownership is viewed as a part buy/part rent scheme. According to the scheme, you can buy a share of a property, which usually varies between 25% and 75%. Homebuyers can get a mortgage to cover the portion of the property that they own, while the remaining sum of the home price is covered by a below-market-value rent that they need to pay to a housing association in addition to any service charge and ground rent. Since a mortgage doesn’t cover the full price of a property, the deposit will be more affordable.
In addition, not all properties can be purchased via Shared Ownership, you can only choose those homes that have been purposefully built for that particular scheme. You can use Korter.co.uk to find a property to buy via Shared Ownership.
Pros to Shared Ownership
- The scheme helps you get on the property ladder, easing your burden and offering long-term stability.
- If you’re buying a Shared Ownership home, your deposit will most likely be lower than if you choose to purchase a property on the open market.
- Your mortgage would be more affordable.
- Monthly repayments are usually cheaper, compared to those of a full mortgage or monthly rent payments.
- You can buy more shares of your home and even get full ownership at some point. The process is referred to as ‘staircasing’.
- You can sell your shares if you’d like.
- Usually, you don’t have to pay stamp duty on an initial purchase.
- While you’re paying your rent and making mortgage repayments, you can occupy your home for the duration of your lease. You can also extend the lease after that.
Cons to Shared Ownership
- A limited number of lenders offer mortgages for Shared Ownership.
- There are additional expenses, such as ground rent and service charges.
- When you staircase to and over 80%, you’ll have to pay stamp duty on the full value of your home.
- Shared Ownership properties are leasehold only. However, in some cases, it’s possible to turn a property into a freehold after increasing your owned portion of the home up to 100%. This, however, must be discussed with the housing association.
- You may not be completely free to make any alterations to your home. In some cases, you’ll need a permit from your housing provider.