4 Reasons Why You Should Consider Using the Shared Ownership Scheme
If you are not currently a homeowner and you are looking to make that all-important first step onto the property ladder in 2022 (or back onto the property ladder if you used to own a property), then you may want to read up on the shared ownership scheme.
Chances are that you’ve probably heard of the shared ownership scheme. After all, it’s been around since the 1970s and it’s still going strong. In a nutshell, shared ownership is a cross between renting and buying. Instead of putting down a 5%+ deposit on the full value of a property, you can put down a deposit of 5%+ on just a share of a property (50% of the property, for example). The remaining portion is retained by a housing association.
You take out a shared ownership mortgage for the share of the property that you own, which will be substantially less than if you were purchasing a property of the same value with a standard mortgage, and you pay rent to the housing association for the portion of the property that you don’t own.
Sounds good, right? If you aren’t in the know, here are 4 reasons why you should consider using the shared ownership scheme.
You might be wondering whether or not you’ll even qualify for the shared ownership scheme. The good news is that there are not 1000 hoops to jump through in order to make use of this scheme. It was designed to be accessible.
You must not currently own a property, so it is generally utilised by first-time buyers or those who used to own a property and cannot currently afford to purchase another. You must be over 18 and have a maximum household income of £80,000 a year (or £90,000 in London). This is in place to ensure that only people who really need the scheme are the ones making use of it.
You can staircase to 100%
In most cases, you can buy further shares in a shared ownership property over time and ‘staircase’ to 100% ownership. ‘Staircasing’ is essentially the process of buying further shares to increase your ownership of the property and decrease the ownership of the housing association and, therefore, the rent that you are charged monthly.
Usually, you have to have owned your share of the property for an agreed time before you can begin staircasing. This restricted period will be detailed in your lease. Also, it’s important to note that some housing associations do limit the share of the property you can staircase up to. So if you definitely want to staircase to 100% somewhere down the line, make sure that this will be possible before you commit to a property.
The rent can be cheaper than on the open market
Like I said, alongside the mortgage payments on your shared ownership mortgage, you will also pay a monthly rent to a housing association. If you are currently renting, you could potentially save money per month by using the shared ownership scheme. It can often work out cheaper.
This is because the rent charged by a housing association is generally less than the rent charged on the open market. You can expect to pay around 2.75% of the property value a year. Yes, you’ll have your mortgage payments too but they will be much smaller than if you were to purchase a property with a traditional mortgage and remember – these payments will be going towards paying off your mortgage instead of your landlord’s.
You may be able to purchase a more desirable property
Because shared ownership makes mortgages more affordable, you may be able to purchase a bigger house or live in a more desirable area than you would have been able to afford if you were buying outright.
When you begin searching for shared ownership properties, you’ll often find them in sought-after areas. This is because a certain number of shared ownership homes will often now be required as a part of the planning permission for any new developments. This also means that shared ownership properties are usually new builds (or relatively new properties).
What are your thoughts on the shared ownership scheme? Do you think it could work for you? Remember to always seek advice and assistance from a mortgage advisor and broker that specialises in shared ownership mortgages. They will be able to hold your hand throughout the mortgage process, as it can be a little more complex than the standard mortgage procedure.
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