Are you moving house and debating whether to rent a property or buy via shared ownership? If so, this blog could help you to make your decision. We will be reviewing the pros and cons of shared ownership properties versus renting to help you make an informed choice.
Why rent instead of buy via shared ownership?
For many, renting a property is a more ‘flexible’ option. For example, you can often enjoy short term leases when you rent a property . This means less commitment if you change your mind about the property, the area or your neighbours!
Renting is also a good way to test a location to see if it works with your lifestyle. You can test the school run or work commute from the property. And if it doesn’t work for you, you can simply give notice at the end of your lease (usually 6 months to one year) and leave.
If you are moving into your first home, chances are you may not have much furniture. If you are renting, you can look for a furnished property. This means you only need to buy a few items before you move in. Be cautious though, damages to any items in the property will need to be paid for, so treat everything as if it was your own.
There is also the fact that you will not need to pay for annual buildings insurance as this is the responsibility of your landlord. Don’t forget to pay for your contents insurance though!
Are you wondering whether regular rental payments can improve your credit score? It is worth a thought. Many have been arguing that making rent payments on time, should contribute to credit scores but often they don’t. There are now some schemes available such as Canopy. They will track your rent payments and improve your credit score. There can be additional costs for signing up and various terms, but it is worth doing your research.
Cons of renting a home
Some say that renting a property is ‘dead money’. In short, you are paying someone else’s mortgage rather than your own. However, if you need some space and don’t have any savings to buy a home, renting is not a bad option. Plus, there is nothing to say that you can’t start saving for a property in the future.
Secondly, you are reliant on your landlord (the person or company who own the property) to resolve any issues and fix any repairs for you. Generally speaking, if you have a problem at your home, most landlords will be on hand to arrange repairs and cover costs. However, there are some landlords who are not as vigilant or easy to get hold of if and when you need them. If you rent from a housing association, there is normally a helpline number and issues should be resolved sooner rather than later.
Can rent increase every year? Well, yes. Once your lease has expired , your landlord can increase your rent. However, most landlords will keep rent at the same rate for a longer period, if they are happy with the tenancy and want to keep you in their property.
Finally, the big D. With any private rental property, you often have to pay a sizeable deposit before you can move in. This is usually a month’s rent upfront, sometimes more. There is now a government run deposit protection scheme which ensures your deposit is kept safe, but this doesn’t guarantee it’s return in the event of any disputes.
Is shared ownership worth it and better than renting?
Quite simply, buying is often better than renting because each month you are paying towards the ownership of your own home. However you need to be aware of the process which will involves different costs including shared ownership solicitors fees, getting a shared ownership home buyers survey and removals.
Shared ownership works differently to buying a property on the open market. However it can be an affordable way to get on the property ladder. This is because the required deposit is smaller so you don’t need as much cash up front to get a shared ownership mortgage. Although you still need to pay rent to the housing association who part own the property. Shared ownership owners often comment that their combined monthly payments are still cheaper than the rent they were paying previously.
Most shared ownership homes are new build with modern fixtures and fittings so do not need much work. If you are the first owner, the property may have a warranty. This means that any faults will be rectified by the builders free of charge. Always query this with your housing association.
Buying shared ownership also means that you can afford to buy a larger home than you would afford on a standard mortgage. And of course, the big plus of owning your own property is that you can decorate it as you wish. Remember though, with shared ownership, because the housing association part own your home too, you must always contact them to have any structural work approved before work commences.
If your income increases or you suddenly have more money you can buy more of your property. This is known as ‘staircasing’. Costs will apply and there is more information about this on our blog page.
Don’t forget that as with any property purchase, shared ownership is an investment. So if the value of your property increases so does your share. Of course this works the other way around too.
Cons of Shared Ownership
As with most things, there are of course negative points to buying a shared ownership home. For example, you may find it frustrating that you are still paying rent. In addition there is a service charge to pay as well as your shared ownership mortgage.
Most shared ownership properties are leasehold. This means that the land belongs to someone else, usually the housing association. If you invest more money into your property you may eventually be able to buy it outright. You may be able to buy the leasehold too. Always check with your housing association.
If you need to find out more about shared ownership leasehold, there are some helpful sites available online, such as The Leasehold Advisory Service.
The property is owned jointly by you and the housing association and you can decorate your home as you wish. However, as we touched on earlier, you will still need to seek permission for any structural changes.
Finally, when it comes to selling your shared ownership home, unless you have bought the house outright, you cannot sell the property on the open market. Housing Associations have 8 weeks to find a buyer for you. If after this time, the property is not sold, you can then advertise your home with an estate agent.
Shared ownership vs renting, what will you do?
We have provided a good summary of the pros and cons of shared ownership vs renting. What is right for you will depend on your long term plans, your current income and savings and situation.
What we can tell you, is that MovingSoon aims to help as many people as we can by advertising affordable homes and helping you to your next step as a homeowner. If you have any unanswered questions or want to find out more simply review our help section and save our blog page for all the latest affordable homes news and updates.
Once you have made your decision use our moving house checklist which lists the things you need to do when moving house.