In the UK, many people are struggling to find a home or property that they can afford to buy. This is due in part to the cost of living increasing, and, of course, due to fewer homes being available for sale.
If you are struggling to find a property that matches your needs at your budget, shared ownership is one option to consider.
Shared ownership is seen by many as a stepping stone for those looking to exit the rental market and take their first step onto the property ladder.
Whilst it may be a step towards outright home ownership, you must weigh the benefits and potential negative impacts of such a significant financial commitment.
What is shared ownership, and how does it work?
Shared ownership schemes are typically run by housing associations, and they are usually only available to first-time buyers. Shared ownership programmes are designed to enable people with lower income wages to acquire property with a lower deposit by sharing ownership with others.
Put simply, shared ownership schemes allow you to take out a mortgage on a portion of the home rather than the whole home. If you choose 25% shared ownership and the property costs £200,000 overall, you will just need to provide a £50,000 deposit and mortgage. The remaining 75% of the property, worth £150,000, is subject to rent.
The type of property you can purchase is not restricted; you can buy a new build or an existing shared ownership property that is being sold as a resale. A shared ownership mortgage and a deposit are used to purchase your primary share.
The good and bad aspects of shared ownership
The major advantage of shared ownership is that you avoid having to take out a mortgage as large as you would if you were purchasing the full property. This can greatly reduce the monthly cost paid towards a mortgage. This presents an exciting way to plan ahead at a time when many tenants find it challenging to save.
It is important to consider your financial positioning before committing to shared ownership, however. Costs and rates are liable to change and increase as time goes on. If the value of your shared ownership home is not increasing at the same rate, you may end up being stuck in an uncomfortable deal in a home you are unhappy with. Talking to a conveyancing solicitor in Portsmouth can ensure you have covered every eventuality before any paperwork is signed.
What about the future?
Further down the line, provided you keep up with rent and mortgage repayments, you may have an opportunity to buy additional shares of the property. This is known as staircasing, and it allows your monthly payments and ownership percentage of the property to increase as you progress and can afford to invest more in your home.
You can sell a shared ownership property at any time, and if the property has increased in value from when you bought it, you will benefit from the sale. If that £200,000 property has increased in value to £240,000, then your 25% has increased in worth from £50,000 to £60,000.
Considering shared ownership?
Andrew & Andrew Solicitors provide timely, resourceful and cost-effective legal solutions for all your conveyancing needs, including shared ownership homes.
Our team meticulously handle every legal aspect of your purchase or sale, leaving you free to enjoy your new home.
We are here to help whenever you are ready. To get started, please talk to our team.