What is shared ownership?
With shared ownership you buy a percentage share of a property and pay rent on the remaining portion that you don’t own.
Shared ownership example:
You buy 50% share of a £200,000 property. You own 50% of the property and pay rent on the remaining 50% that you do not own.
What is the benefit of shared ownership?
The main benefit is that it increases your buying power by enabling you to live in a more valuable property. You also require a much smaller deposit and mortgages are available with no deposit at all. Shared ownership is a good solution for homebuyers that are caught in the rental trap, with limited deposits and living in locations where property prices are relatively high.
What are the disadvantages?
The main disadvantage is that you only own a share of the property. Whilst you can buy the remainder of the property (this is called staircasing see below) you need to be aware that if your property increases in value the cost of buying additional shares will also increase. So 50% of a £200,000 property today may be different in 10 years time. You will also have a monthly rental cost to pay for.
Can I buy my property outright?
Yes, you buy additional shares up to 100%. This is called staircasing. This can become more expensive if your property increases in value. Your mortgage broker will explain this to you.
The Pros:
1- Shared ownership can help first time buyers take the first step onto the property ladder.
2- By purchasing this way, you may be able to live in a property that you could not afford outright.
3- It can make taking out a mortgage more affordable.
4- You may not need a deposit.
5- You can work your way up to owning the property outright (staircasing)
The Cons:
1- You have to pay rent, along with other service costs.
2- Staircasing can be expensive if the value of your property increases.
3- Shared ownership is only available on selected properties
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