Many people look to get on the property ladder as this can be a great future investment and a way of securing your own home. With times ever changing this, can be particularly difficult. One route to this can be through a ‘shared ownership’ scheme which allows people to purchase a share of a property rather than outright. This could be useful if you want to purchase a property, but a typical mortgage is out of reach due to your financial circumstances.
When is shared ownership a good idea?
Having a low deposit can mean that lenders are scarce and hard to come by; taking the shared ownership route would be one way of allowing the purchase of a property without having too much of a deposit available. This is due to being able to purchase between 25-75% of a property and paying your mortgage for the part you own as well and rent on the part you do not. In effect this will require a lower deposit, as your share is decreased. Therefore you are placing a percentage based on a lower purchase price. If, however, you happen to have a higher percent deposit then this will often result in paying a lower amount of interest as better rates will become available, meaning shared ownership could also lead to obtaining a mortgage at a more desirable rate.
Shared ownership is not ideal for everyone, so it is important to recognise when it’s an ideal method to utilise and when alternative options are the better choice. If someone has a large deposit and a high income, then shared ownership may be counter productive as they could simply obtain a standard mortgage on the full value of the property, therefore owning it outright.
It is often a way of the “affordable housing” scheme, and therefore offers a possibility of home ownership, when the conventional sense is not achievable.
Potential of Shared Ownership
Shared ownership will allow you to begin making payments to a mortgage and break the cycle of paying a large amount of salary towards rent each month. Although this might seem strange to be paying a mortgage and rent simultaneously, this can be a useful way of securing a property until you are in a better financial situation. This also opens options such as ‘staircasing’. This is when a percentage of a property has been purchased, the homeowner can then purchase further shares of the house from the housing association until they own the home outright themselves, or at the very least a higher share than they started with. This is a long-term solution to any individual looking to secure their property despite not being in an optimal financial situation at the beginning.
The benefits of taking this route will also be noticed in the longevity and stability of the housing market, allowing this to be a future investment if housing prices continue to rise. If staircasing is not what you would like to do, then your share of the property could be sold and used as a deposit if you were looking to move on to purchasing without the use of shared ownership or staircasing. If the property has risen in value, then this will be reflected in your share.
On a final note, it is essential to consider which options are right for you as each case is individual. If this seems like an ideal option for you, please contact us to discuss things further and our team will be able to assess your situation and answer any further questions you might have.