HAVE YOU CONSIDERED SHARED OWNERSHIP? (here’s what you need to know)
TL;DR:
With smaller upfront costs and a gradual path to owning your home, shared ownership is a great way of getting onto the property ladder. However, it’s also important to be comfortable with paying both rent and a mortgage, as well as keeping in mind any restrictions on subletting and how you can use the property.
We know what it’s like…
…You’re eager to get your foot on the property ladder, but that troublesome deposit still feels like a hurdle you just can’t overcome. If this sounds familiar, we’d recommend taking a look at a shared ownership property. With a smaller deposit and lower monthly costs, it may just be the golden ticket you need to purchase the house of your dreams. Let’s take a closer look!
What is a shared ownership property?
You may have come across the term ‘part buy, part rent’, and that’s essentially what shared ownership is all about. Rather than buying your chosen property 100% upfront, you instead purchase a share (usually between 10% and 75%), before paying rent on the remaining portion to a housing association, local council, or landlord.
The best part? Over time, you can gradually start to buy more and more of the property until you eventually own it outright, a process you may see referred to as ‘staircasing’.
How much is the deposit for a shared ownership property?
A great feature of shared ownership is, of course, the smaller deposit, which is calculated on just the share you’re buying rather than the full property value.
For example, take a house worth £300,000. Without shared ownership, a 5% deposit would set you back £15,000. In contrast, if you buy a 25% share worth £75,000, that 5% deposit transforms into a more manageable target of £3,750.
What outgoing costs can you expect?
So, you’ve put down a deposit and secured the property, now what? With shared ownership, there are a few extra expenses to balance, including mortgage payments, rent, service charges and good old regular household bills. For an exact breakdown of what you might expect to pay, you can check out our monthly costs calculator, but we’ve also got all the details right here.
What is a shared ownership mortgage?
A shared ownership mortgage operates in much the same way as a standard mortgage, so the process is easy to understand. The main difference is that it’s based only on your share rather than the full property value. Plus, lenders will also look at your rent and any service charges when checking affordability.
How much rent do you pay in shared ownership?
Yes, alongside your mortgage, you’ll also be paying rent on the share you don’t own. As with the mortgage, this is calculated based on the remaining percentage, meaning it is all proportional.
Don’t worry though! In England, the rent is capped at no more than 2.75%, meaning on a property worth £200,000 that you own half of, you would be paying around £229 a month. Just remember that rent may increase annually based on inflation or a similar index, so make sure to check your lease for the exact details.
Are there any hidden costs in shared ownership?
When planning for shared ownership, it’s important to keep in mind the less obvious costs. For starters, even with a landlord, you’re generally responsible for repairs and maintenance inside your home, including fixing appliances and DIY. Some leases can even require contributions to a reserve or repairs fund, which is basically a savings pot for big future projects on the building.
There may also be service fees if your property includes communal areas that require upkeep.
Can you rent out a shared ownership property?
Ultimately, the purpose of shared ownership is to help you live in a home you part-own, so you cannot sublet the entire property. It is possible, however, to rent out a room as long as your landlord and lender agree.
There are a few exceptions where full subletting may be allowed, like if you are in the armed forces and get posted elsewhere. However, even in these cases, you’ll still need written permission from your landlord, and there may be conditions on how long you can rent it out and how much rent you can charge.
Of course, once you’ve staircased to 100% ownership, you have more flexibility, but until then just make sure you are still following your lease, mortgage conditions, and local regulations!
Is shared ownership right for you?
If you’ve dreamed of owning your own home but felt like you were just one giant deposit away from making it happen, shared ownership is a fantastic way to take your first step onto the property ladder.
Before you take the plunge, it’s a good idea to compare the total monthly cost (mortgage, rent, service charge) with renting or buying outright, as well as keeping in mind any restrictions on subletting and how you can use the property.
To take the next step, start exploring our shared ownership properties today! Or for a bit of extra information, take a look at all the details on our full page. If it isn’t for you, don’t worry! We have plenty of options available to help you achieve home ownership, including part-exchange and rent-to-own schemes.
DEVELOPMENTS WITH SHARED OWNERSHIP
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Kingsley Manor
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