Everything you need to know about shared ownership!
East Anglian Specialist Conveyancers, Hayward Moon, reveals everything you need to know about shared ownership!
For first time buyers getting onto the property ladder can sometimes be difficult and there are many different options and routes you can take which can get a little confusing! Today we are going to explain exactly what a shared ownership scheme is and everything involved so you can decide if this is the route for you!
What is a shared ownership scheme?
A shared ownership scheme is aimed at first-time buyers that may not be able to afford a mortgage on 100% of the home. It gives you the chance to purchase a share of your home and then pay rent on the remaining share.
You're able to use this scheme if:
Your household earns £80,000 or less outside London or if your household earns £90,000 a year or less in London.
You have to be a first-time buyer, or if you use to own a home but can't afford to purchase one now or you're an existing shared owner looking to move.
So how does it work?
A shared ownership works by you being able to buy a share of between 25-75% and then paying rent on the remaining share. Instead of working out a 10-20% deposit, this mortgage will usually only require 5% of the property's value. Later on, you could begin to buy bigger shares as and when you can afford to.
Pros & Cons of a shared ownership mortgage
Pros: It is the cheapest way to get your initial step onto the property ladder! The 5% deposit means you will only need £7,500 for a property valued at £150,000, however, because you're only buying a share you could even put less of a deposit in. It is an option which means you don't need a large deposit and is far more obtainable.
Cons: If you want to start increasing your shares in your house you will need to have the house valued again. If the price of your property has increased then so will your payments for a share. You will also have to pay the valuer's fee every time you need to upgrade. The main disadvantage is that until you own 100% shares of the property you're treated as a tenant in law, which means there is still the possibility of losing your property if you're not able to keep up with any payments despite the shares you have in your home.
Depending on the rules of the local housing association you may find it difficult to rent your home especially if you can't afford to upgrade your share to 100% this may make it challenging should you decide to leave your home.
What happens when you want to sell?
If you own a share of your home and you decide to sell, the housing association has the right to purchase your home first, and they also have the right to find a buyer for your home. If you own 100% of your home then you can sell it yourself.
The shared ownership scheme is a great option if you know you're going to get a steady increase in wages etc and you have the goal of eventually working your way up to 100% shares in your home. It is the easiest way to get onto the property ladder but it's important to stay motivated to increase those shares so you have full ownership.