Shared Ownership is an affordable home ownership scheme which makes it a whole lot easier for first time buyers to get on the property ladder. In simple terms it allows buyers to purchase a share of property and pay rent on the remaining share. Many first time buyers struggle to get a deposit together so by going the shared ownership route you can dramatically reduce the amount required for a deposit. It’s a tried and tested means that has helped thousands of first-time buyers onto the property ladder across England.
Before any big decision it is good to consider both the advantages and disadvantages. Below we have set out the pros and cons of shared ownership, so you can weigh up whether shared ownership would work for you.
- Shared Ownership allows you to get on the property ladder as an owner-occupier, offering long-term stability without overstretching yourself.
- Deposits are generally lower than buying on the open market.
- Shared Ownership makes mortgages more accessible, even if you’re on a lower wage.
- Your monthly repayments can often work out cheaper than if you had an outright mortgage. The monthly payments are also generally lower than if you were to rent privately.
- You have the option to buy more shares of your home in the future via a process known as ‘staircasing’. In most cases, purchasers can staircase all the way to 100%, in which case they are no longer required to pay any rent, just their mortgage along with any relevant service charges and ground rent.
- You can sell your share in the property at any time.
- It is not normally necessary to pay Stamp Duty land tax on an initial purchase.
- Unlike private renting, you have security of tenure. As long as the rent is paid and mortgage repayments are made, you can live in the property for the duration of your lease – this is usually 99 or 125 years. At the end of the lease, the leaseholder can organise an extension with their housing provider; we would recommend appointing a solicitor and surveyor with experience in this area.
Things to also consider
- Not all lenders offer mortgages for Shared Ownership, however the majority will.
- You have to pay 100% of the ground rent and service charge on your property, however low your share is.
- You will have to pay Stamp Duty on the whole value of the property when your owned share equals or exceeds 80%.
- Shared Ownership properties are sold on a leasehold basis; leasehold ownership is like a long tenancy where your lease will give you the right to occupy and use the home for a longer period (usually 99 or 125 years). The term of the lease will be fixed at the very beginning, decreasing in length each year, and the home can be bought or sold during that time.
- All properties will be leasehold only, however, some homes can become freehold after staircasing to 100%; this would need to be agreed with the relevant housing provider.
- While you are free to decorate internally, there may be restrictions on what home improvements you can do. You may need to obtain permission from the relevant housing provider before you make any structural alterations to your home.
If having looked at both sides of the equation you decide that shared ownership is for you, we would love to help you secure your first home. Contact our helpful team for more information by following this link https://www.housingsolutions.co.uk/find-a-home/shared-ownership/.
We are here to answer any questions you may have, and help you find a place you love.