Shared Ownership offers a great route to market for buyers who are otherwise unable to buy on the open market. Nevertheless, it is important to weigh up your options before you commit to the scheme. Our estate agents have put together this guide and have weighed up some of the pros and cons for you to consider.
Shared Ownership (also known as part buy/ part rent) is an alternative home ownership scheme that gives first time buyers, who do not currently own a home, the chance to buy a share in a new build or resale property.
Shared Ownership allows buyers to purchase a share of a home; usually this will be between 25% and 75%. Purchasers will pay their mortgage on that share, as well as below-market-average rent on the share that they don’t own. The buyer will also have to pay any service charge or ground rent.
Because the purchaser is only taking out a mortgage for the share that they own, the deposit required is often much lower than would be required if buying a property out right.
Pros of Shared Ownership
1. Shared Ownership means you can get on the property ladder as an owner/ occupier, so you get long-term stability without overstretching yourself.
2. The deposit will be lower than buying on the open market.
3. A Shared Ownership mortgage is more accessible, even to those on a lower wage.
4. Your monthly repayments will, generally, be cheaper than if you had an outright mortgage, and cheaper than if you were to rent privately.
5. You have the option to buy more shares of your home in the future, this is called ‘staircasing’. In most cases you will be able to staircase all the way to 100%, meaning you will only be left paying your mortgage, not the rent.
6. You can sell your shares at any time.
7. Unlike renting, you have the security of tenure. This means, as long as the rent and mortgage payments are made, you can live in the property for the duration of your lease.
Cons of shared ownership
1. Not all mortgage lenders offer Shared Ownership.
2. You will be obligated to paying 100% of the ground rent and service charge on the property, even if your share is not 100%.
3. You will have to pay Stamp Duty on the whole value of the property if your share exceeds 80%.
4. All Shared Ownership properties will be sold on a leasehold basis; however some could become freehold If you staircase to 100%.
5. You will be free to decorate internally, but there may be restrictions on what home improvement works you can do. You might need to get permission from the relevant housing provider.
