Is Shared Ownership a Guaranteed ‘In’ on to The Property Ladder?

Sophie Davidson has the answer.

A shared mortgage is where you buy a share in the property, rather than the entire thing. You pay a mortgage on the share you own, and you pay rent on the share you don’t own too. Typically, because you are buying a share in the property, the initial deposit you need is lower at around 5% of the total property price, instead of 10-20%.
 
Shared ownership properties are sold through housing associations, so this isn’t for you if you want to be able to choose from every property on the market. However, if you want to own your home rather than just pay your landlord’s rent each month, then shared ownership could be a good idea.
 
That said, be warned that shared ownership could be an expensive way to own a property. The mortgage repayments on shared ownership are typically set at an interest rate of 4-6%, and you’ll need to pay rent on top of this – so make sure you can afford your monthly outgoings.
 
House Simple’s blog explains that the Shared Ownership was originally designed to help low income families, but as the rules get more relaxed, buyers from all background are starting to take up shared ownership mortgages.
 
Shared Ownership is particularly beneficial to those who are struggling to buy their first home due to having a poor credit rating, being self-employed or not having enough saving to buy the the whole property. However, the most notable benefit is that you can stay in the property as long as you like, doing what you like with it (though there are some caveats to this), while still having the option to buy into more of the property in the future. If you do decide to sell up and the property has gone up in value, you will split the proceeds with the housing association.
 
What may surprise you is that even though you may only own 30% of the property with the housing association owning the rest, you will have full responsibility of the property. This could be a big issue, as service charges are variable and have to be paid on top of your rent and mortgage, which means even more monthly outgoings.

Same with repairs – it’s up to you to keep your home in good working order just as if it was 100% your own. This can be a point of argument for some, but for others it’s great because you don’t have the looming shadow of a landlord that can enter your property for inspection whenever they choose.
 
If you are interested in getting your own home through shared ownership, you’ll need to start looking at what’s on the market. You’ll probably find shared ownership properties in your local area, but just check you’re happy with the neighbourhoods they’re available in before you jump in. Ultimately, shared ownership can be a guaranteed ‘in’ on to the property ladder for those who aren’t able to get a mortgage for the entire property. However, you can also get on the property ladder through other housing programmes, but make sure you check the eligibility restrictions for these.

Publish date: 15/09/2017