In the UK, finding an affordable home or property to buy has become increasingly difficult for many. Rising living costs and a limited supply of homes for sale are key factors contributing to this challenge.
If you are struggling to find a property that meets your needs within your budget, shared ownership could be a viable option. Often considered a stepping stone for those looking to move away from renting, shared ownership provides an opportunity to take the first step onto the property ladder.
However, while it can be a pathway to full home ownership, it is important to carefully consider both the benefits and potential drawbacks of this significant financial commitment.
What is shared ownership, and how does it work?
Shared ownership schemes are typically managed by housing associations and are generally available only to first-time buyers. They are designed to help individuals on lower incomes get onto the property ladder by requiring a smaller deposit and sharing ownership with a housing provider.
In simple terms, shared ownership allows you to take out a mortgage on a portion of the property rather than the entire home. For example, if you opt for 25% shared ownership on a property worth £200,000, you would need a mortgage and deposit for just £50,000, while the remaining 75%, valued at £150,000, would be subject to rent.
There are no strict limitations on the type of property you can purchase, you can buy a new build or an existing shared ownership home being resold. Your share of the property is secured through a mortgage and deposit.
The good and bad aspects of shared ownership
A key advantage of shared ownership is that it requires a smaller mortgage than purchasing a property outright, which can significantly lower monthly mortgage payments. This makes it an appealing option, especially for tenants who find it challenging to save while renting.
However, it is essential to assess your financial situation before committing. Costs and interest rates may rise over time, and if the value of your shared ownership home doesn’t increase at the same pace, you could find yourself in an unfavourable position.
Consulting a conveyancing solicitor in Portsmouth can help ensure you’ve considered all potential risks before signing any paperwork.
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.