When we talk about getting on the property ladder for the first time, the prospect can feel overwhelming: how much will you need to save for the deposit? Is the property affordable? Will it need a great deal of renovation or redecoration? How much will the mortgage be? All these questions can make the whole process appear a bit daunting.
However, one option sometimes overlooked, particularly if you don’t have funds available immediately, is shared ownership. A customer can “part-rent, part-buy” a property, by buying a stake in it. The buyer shares their ownership with a housing association, with the buyer taking between a 25% and 75% share and paying rent of up to 3% per annuum on the remaining portion.
Shared ownership properties tend to be new build, or built very recently, making it an affordable way for an individual to get what is, in reality, a more modern property than they could afford without help.
Due to the nature of shared ownership, the buyer will typically be required to pay a smaller deposit and have a lower mortgage. For example, if someone were to buy a 50% share in a £150,000 property, their share would be worth £75,000. A minimum deposit would be 5%, which is a percentage of their share rather than of the cost of the property as a whole, equates to £3,750 and a mortgage of £71,250.
While this sounds enticing, one must also remember that there is still the matter of the rent on the housing association’s share. If we suggest that in this example it charges 2.5% of its share, this would be £1875 across the year, or £150 per month. This would mean the buyer making this repayment on top of a mortgage. The individual should look at the total cost before making a decision about whether this is the right method of purchase for them.
I spoke to Simon Wright, Director at Robinsons Estate Agents in Darlington, about his firm’s relationship with shared ownership properties. He said: “There is a common misconception that shared ownership housing can only be purchased by approaching a housing association directly, however many estate agents, including Robinsons, have many of these properties available.
“If shared ownership is something that you’re interested in, I would recommend speaking to your estate agent, and telling them that you’d like to look into the option, and they can show you what is available. They can also support with any questions you might have about the process.”
Vicky Griffiths, Sales and Marketing Coordinator from Beyond Housing, which offers shared ownership homes at locations across the Tees Valley, said: “Shared Ownership is becoming an increasingly popular way to take the first steps onto the property ladder. We understand it is getting more and more difficult to become a homeowner, making shared ownership schemes a fantastic way to invest in a property over time.”
As with any property purchase, you should also enlist a solicitor to deal with the legality of the move. This is still a requirement with shared ownership. When you approach your solicitor, you should make them fully aware that the property is shared ownership. You may also find that on some shared ownership properties have a stamp duty deferral until the buyer ownership reaches 80% but you should discuss this with your solicitor first, to check that this is the case.
Please note: This article is intended as guidance only. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.