Shared ownership, also known as part ownership, is becoming increasingly popular, especially in today’s economic climate.
In this post, we’ll look at what shared ownership is, how it works, and the benefits and disadvantages.
What is shared ownership?
A common question we come across is what shared ownership means. So, we’re going to explain.
Simply put, shared ownership is when you own a share of a home rather than the entire property.
Continue reading to find out how it works.
Understanding how shared ownership works
Shared ownership is when you purchase a percentage share in a home, ranging from 10% to 75%.
You pay rent to a landlord for the percentage you do not own. In most cases, you’ll also be required to pay a monthly ground rent and service charge for the upkeep of communal areas.
Shared ownership programmes are becoming increasingly common, particularly with new properties. However, there are other choices, such as shared ownership resale schemes.
Part-buy, part-rent properties are a terrific way for some people to get on the property ladder while also acquiring a better house than they would otherwise get.
There are restrictions on who can apply for shared ownership, which are:
- Your household income is £80,000 a year or less (£90,000 a year or less in London)
- You cannot afford all of the deposit and mortgage payments for a home that meets your needs
One of the following must also be true:
- You’re a first time buyer
- You used to own a home but cannot afford to buy one now
- You’re forming a new household – for example, after a relationship breakdown
- You’re an existing shared owner, and you want to move
- You own a home and want to move but cannot afford a new home that meets your needs
Costs-wise, you’ll most likely have to pay a reservation fee, which means no one else can reserve the home for a specified period of time.
You’ll also need to pay a deposit, which is normally between 5% and 10% of the value of the share you’re purchasing. Other costs to consider include solicitor fees, monthly mortgage payments, landlord rent, and stamp duty.
Shared ownership pros and cons
Now you know a bit more about what shared ownership is and how it works, let’s focus on the pros and cons of shared ownership properties.
Shared ownership benefits
- Enables you to join the property ladder
- Long-term security
- Mortgages are easier to access on a smaller salary
- You can buy more of the house in the future until you own it completely
- You have the option to sell your shares at any time
Shared ownership cons
- Shared ownership mortgages can be more tricky to find
- You have to pay the whole ground rent and service charge
- There may be home improvement restrictions
- You still have to make rental payments
- All properties sold under shared ownership are leasehold – shorter leases can be a problem if you’re trying to sell
How to find shared ownership mortgage lenders
When you’ve made the decision to pursue a shared ownership mortgage, it can be difficult to obtain one.
The greatest advise we can give is to contact a mortgage broker to assist you in locating the best part ownership mortgage for you.
Sett has extensive experience in shared equity mortgages and can guide you through the full procedure from start to finish.
How does shared ownership work when you sell?
When the time comes to sell your home or your shares in your home, you must contact your housing provider/landlord and notify them.
If they find a buyer, they will go through the same steps you did when you bought the house. If your housing provider is unable to locate a buyer within two months, you can sell it privately or through an estate agent.
The procedure is similar to that of selling a typical property, including valuations, contracts, EPC certificates, and so on.
Final thoughts
Shared ownership can be a fantastic option – and we’re more than happy to discuss this with you.
If you’re looking for a shared ownership mortgage – make sure to get in touch today.