Shared Ownership: is it a good idea or bad idea?

Shared Ownership has had some tough press recently. You’ve likely seen more of the bad stories than the good ones about helping people buy their first home. But despite this, Shared Ownership is actually becoming more popular. Over the last decade, 103,000 Shared Ownership homes have been built and sold, according to the National Housing Federation. Like anything, it has its ups and downs. Let's look at both the benefits and the drawbacks:

The benefits of Shared Ownership:

Shared Ownership is a great way to start your journey as a homeowner, offering a stable living situation without stretching your budget too thin. Here's why it might be the right choice for you:

Lower initial costs:

The deposits for Shared Ownership homes are significantly more affordable than those required for buying a home on the open market.

Accessible financing:

Mortgages are possible with Shared Ownership, even if your income isn't very high. Plus, your monthly payments could be less than what you'd expect to pay for a full mortgage or private rent.

Option to buy more:

Over time, you can buy additional shares of your home through a process called 'staircasing.' Eventually, you might own 100% of your home, at which point you won’t need to pay rent anymore - just your mortgage, service charges, and ground rent.

Flexibility to sell:

You can sell the shares you own whenever you choose. This is potentially helpful when downsizing to release equity, getting on the ladder or helping to readjust living arrangements, for example, following a relationship breakdown.

Stamp Duty savings:

Often, you don't have to pay Stamp Duty Land Tax on your initial purchase, which can save you money.

Long-term security:

Providing you keep up with the rent and your mortgage payments, you can live in your home throughout the duration of your lease, which usually lasts for 99 or 125 years.

Shared Ownership is a fantastic option if you're looking to become a homeowner but have been priced out of the area where you want to live on the open market. It offers both flexibility and security, making it a popular choice for many first-time buyers.

Things to consider about Shared Ownership:

Now, let’s talk about some of the things that might make you pause. It’s always good to have the full picture, right?

Limited mortgage options:

Not all banks provide mortgages for Shared Ownership, but many do. It's worth checking with lenders to see what options are available.

Full responsibility for costs:

Even if you only own a part of your home, you'll still be responsible for paying 100% of the ground rent and service charges · Potential Stamp Duty Land Tax: Depending on the value of any additional shares you buy through staircasing, you might have to pay stamp duty. The Home Owners Alliance stamp duty calculator can help you with this.

Leasehold nature:

Shared Ownership homes are usually leasehold, meaning you have a set time (like 99 or 125 years) when you can live in the home. Over time, the length of this lease decreases. While you can buy or sell the home during this period, the decreasing lease can be a point to consider.

Home improvement restrictions:

You're free to decorate inside as you wish, but for any major changes or structural alterations, you’ll likely need permission from your housing provider, as you would through planning with an open market equivalent.

The decision is yours
Shared Ownership

So, there you have it. Shared Ownership can be a fantastic opportunity, but it’s not without its considerations. It’s all about what works best for you and your circumstances. Remember, every cloud has a silver lining, and every property decision has its pros and cons.
Shared Ownership