Shared ownership allows you to purchase a share of a property and pay rent on the remaining portion. For many people, buying a shared ownership property is a way to step onto the property ladder when the prospect of full ownership seems out of reach. It’s a popular choice for first-time buyers in the UK, but like any housing option, it comes with its own set of advantages and disadvantages.
The Pros of Shared Ownership:
- Affordability: The most significant advantage of shared ownership is affordability. It’s often easier to come up with the initial deposit and mortgage for a share of a property rather than the entire value. This means you can enter the property market with a smaller financial commitment.
- Staircasing: Shared ownership allows you to gradually increase your ownership share in the property. As your financial situation improves, you can buy more shares, ultimately reaching 100% ownership if you wish. This flexibility is a valuable feature of shared ownership.
- Security: Shared ownership provides a sense of stability that renting does not. You have a secure place to live, and you won’t face the fear of eviction due to a landlord’s decision to sell the property or raise the rent.
- Mortgage vs. Rent: Your monthly costs in shared ownership are a combination of mortgage payments and rent on the portion you don’t own. As you buy more shares, the rent you pay decreases, making it more cost-effective over time compared to renting a similar property.
- Easier Entry into the Market: Shared ownership is often easier to access for first-time buyers and those with lower incomes. This can be especially advantageous in regions with soaring property prices.
- Maintenance and Repairs: You won’t have to worry about all the maintenance and repair costs typically associated with full homeownership. The responsibility for these expenses often falls on the housing association.
The Cons of Shared Ownership:
- Limited Property Choice: Shared ownership properties can be more limited in terms of location and type. You might have to compromise on your desired area or property style, as not all properties are available through this scheme.
- Eligibility Criteria: Not everyone qualifies for shared ownership. Eligibility criteria often include a maximum income threshold and requirements like being a first-time buyer or a former homeowner who can no longer afford to buy a property.
- Resale Restrictions: When you decide to sell your shared ownership property, the housing association has the right of first refusal. This means they get the opportunity to find a buyer before you sell it on the open market, which can limit your selling options.
- Ongoing Costs: Shared ownership properties may come with additional costs like ground rent and service charges. These fees should be factored into your budget, as they can add to your monthly expenses.
- Market Value Fluctuations: The value of your shared ownership property can fluctuate depending on the housing market. While this can be an advantage if your property’s value increases, it can also be a disadvantage if prices drop.
- Not Full Ownership from the Start: Shared ownership means you won’t have 100% ownership of your property from the beginning. If your goal is full ownership right away, this might not be the right choice for you.
How to Determine if Shared Ownership is Right option for You:
- Assess Your Affordability: Carefully evaluate your financial situation and ensure you can meet the mortgage criteria for the share you want to buy.
- Calculate Monthly Costs: Compare the total monthly costs of your shared ownership property to renting a similar one. Make sure it fits your budget and long-term financial goals.
- Consider Long-Term Plans: Determine if shared ownership aligns with your long-term homeownership goals. If your ultimate aim is 100% ownership, shared ownership can be a valuable stepping stone.
- Eligibility Check: Ensure you meet the eligibility criteria. Income thresholds and other requirements can affect your ability to participate in shared ownership.
- Market Research: Examine more about the housing market in your desired area. Shared ownership properties are often available in regions with high property prices, so make sure it suits your location preferences.
- Future Flexibility: Assess whether shared ownership provides the flexibility you need. Staircasing allows you to increase your ownership, but consider if it aligns with your financial goals and plans.
Shared ownership can be an excellent option for those looking to get onto the property ladder when full ownership might seem daunting. It offers affordability, security, and flexibility, making it a popular choice for many in the UK. However, like any housing option, it has its limitations, such as property choice, eligibility criteria, and resale restrictions.