If you’re keen to buy a place of your own, but are put off by the record-breaking rise in house prices, Shared Ownership could help you out. But that’s not to say it’s right for everyone.
What is Shared Ownership?
This government scheme allows people the chance to buy a share in a property. You pay a mortgage on the portion you own, while paying rent on the rest of the share to a housing association.
What are the pros and cons?
Taking that first step to purchasing a property is a big deal. That’s why we’re here to help you decide what move is right for you.
Pros of Shared Ownership:
• Lower upfront costs: The deposit you pay is 5% or 10% of the price of your share, not the value of the whole property. That means if you only own a 25% share, the deposit you need will also be cut by a quarter
• Cheaper rent: It’s likely you’ll pay less on the share you don’t own than the cost of rent in the standard market. This might give you more room to reach your saving Goals
• ‘Staircasing’: If you want, you can buy more shares until you own thE whole property. When you reach 100% ownership, you stop paying rent and continue paying the mortgage you have left
• Commitment free: You can sell your shares at any time, so if your situation changes, you can make some money back. This might be more than you bought if for, if your share grows in value
Cons of Shared Ownership:
• Getting started: Not all lenders provide mortgages for Shared Ownership, meaning interest rates can be slightly higher than with a standard mortgage
• Weighing up payments: Although a smaller deposit will initially save you money, mortgage repayments and rent might end up costing the same, or more than, repayments on a full mortgage
• Additional costs:Whatever share you own, you have to pay the ground rent and service charge for the property. When your share hits 80%, there’s Stamp Duty on the whole value of the property to pay too
• Difficulty ‘staircasing’: If the value of your property increases, and you want to buy more shares, this will cost you more. Consider if you’re happy to take that risk
• Not-so-spoilt for choice: There’s not much room to be picky with location, as you’ll have to buy where Shared Ownership properties are available. They’re also only new-builds or resales
Am I eligible for Shared Ownership?
You can be a first-time buyer, someone who used to own a home but can’t afford to buy a new one, or an existing shared owner. Your annual household income must be less than £80,000 a year (or less than £90,000 in London). You must also be aged 18 or over.
Are there any alternatives to Shared Ownership?
Yes, there are other schemes you can mull over. For example, a 95% mortgage allows you to borrow up to 95% of the price of a property, leaving you to pay only 5% deposit upfront.
First-time buyer? Use our top tips to help you drum up that housing deposit and get a foot on the ladder.