So you’re buying your first home or getting back onto the property ladder and you’re considering shared ownership properties. Good for you. However, you do have a small voice at the back of your mind saying ‘is shared ownership a good idea?’ that you can’t seem to distinguish.
It’s quite normal to have concerns when you buy a house, whether you are buying it outright or on an affordable housing scheme. Our homes are (for most of us) the most expensive purchase we’ll ever make, so we need to do it right.
In this blog post we will explore the pros and cons of shared ownership and hopefully answer any questions that may help put your mind at rest.
Is shared ownership a good idea and right for me?
This is a question that is circumstantial and different for everyone. The main reason you have chosen shared ownership for buying your home is most likely because you couldn’t afford a mortgage on your current salary for the type of home you want to move into.
The scheme provides an opportunity to still ‘own’ a home and with you and your family as the sole occupiers, it is truly yours. It would not feel like anyone else’s house. In addition, most housing associations will allow you to decorate the house however you like. You may feel more secure in a shared ownership house as you do not have the instability of potential being asked to leave. Ofcourse, if you did not keep up with your mortgage payments you may be asked to leave. But this is different from renting where you could be asked to leave because of other reasons.
You need to be able to afford the mortgage on your share of the property as well as the housing association’s rent for their share and any management fees. Depending on where you are up to in the house purchase process you may have calculated this already.
You should work out the best option for you and go with that. Many people struggle to decide the best route for them, whether that be shared ownership versus renting
Main benefits of shared ownership
Because most shared ownership homes are new builds, they require very little maintenance. If you are moving into a brand new home you may also be able to choose your own kitchen and bathroom suites as well as fixtures and fittings. This can save a lot of money as opposed to replacing existing fixtures and fittings in a house that has already been lived in.
Many of the new homes will also have a warranty so any repairs will be covered by the housing association. Ask your housing association of the terms for your home and what cover you may have.
You do not need a huge deposit to buy a shared ownership property. If you are buying a 25% share of a shared ownership home, you will only need a 10% deposit on the share that you are buying. For example, if the house you are looking to buy is £200,000 and you want to buy a 25% share, you would only need a £4,000 deposit.
Things that could be a problem with shared ownership property
Let’s be realistic, there are pros and cons for everything. Buying via shared ownership is no different. For example, all shared ownership homes are leasehold. This means that you will need to pay a ground rent. You will also need to find out the term of the lease and the costs for extending it at a later date.
If you need to find out more about shared ownership leasehold, there are some helpful sites available online, such as The Leasehold Advisory Service.
Whilst most housing associations will provide almost free reign to decorate your home as you see fit, (do check any clauses around this though!) you would have to gain permission for any structural work. So if you were planning on knocking down walls or adding an extension always ask the housing association if they are open to this before you move in.
You may not also get the chance to own 100% of the home. Usually, you can only staircase 3 times in order to get to 100%. Therefore if you are wanting to own 100% of the property, you should save as much as you can to staircase within the 3 increments.
Will I be able to buy a shared ownership property outright?
With most shared ownership homes you do have the option to buy more of the property as you are able to save more. This is known as staircasing. There are exclusions to this. For example if you are buying your shared ownership home via older persons shared ownership, or the housing association may have put a cap on the amount of the home you can own. You will need to check with the housing association to find out if there is an options to buy the property you are interested in outright at a later date. So, you can not initially buy 100% of a shared ownership property. You will have to staircase to 100%.
What happens if I want to sell my shared ownership home?
If you bought your home as a starting point and wish to move on after a number of years to another property, you need to contact your housing association to discuss putting the property for sale. You can also take a look at our tips for selling shared ownership.
Your housing association have up to 8 weeks to sell your home for you. After that time you can takeover proceedings to sell your home if a buyer has not already been found.
Go for it!
It is always a stressful experience buying your first home and it can be overwhelming. However shared ownership is a great starting point. It offers you the chance to live in a quality new home in an area you might not have been able to afford otherwise.
If the housing market improves, you can make a profit on your share too which provides you with more cash to put down on your next home.
Start your search for shared ownership properties today.