16/08/2022
Shared ownership is a government-supported scheme designed to help people get onto – and move up – the property ladder. Since its introduction it’s helped thousands of homebuyers across the country.
Each year, Shared Ownership Week raises the profile of shared ownership, collating stories and useful advice about how the scheme can help you to buy a home with a lower deposit and smaller mortgage. This year’s event takes place between 15 and 21 September.
If you’re considering shared ownership, you may have heard negative stories or misconceptions about how the scheme works. So, read on for seven common myths about shared ownership, and why they are untrue.
1. You’ll never own 100% of your home
When you buy a property through shared ownership, you typically buy a small share of the home (perhaps 25%). You then pay rent on the remaining share to the housing association that you bought the property from.
Using a process called “staircasing”, you can then buy further shares in your home. This increases the share of the property you own and decreases the rent you pay.
Using this process you can, in most cases, keep buying additional shares until you own 100% of your home.
2. You have to share the property with someone else
This is a common misconception – mainly due to the word “shared” in the name of the scheme!
The reason it is called “shared ownership” is because you share the ownership of your home with a housing association. You buy a percentage share in a property and pay rent to the housing association for the other share.
You don’t have to live in the property with anyone you don’t want to.
3. You can’t decorate the property in the way you would like
As you pay rent to a housing association for the share of the property you don’t own, you may believe that it means you must treat the property as you would another “rental”.
However, one of the key attractions of buying a shared ownership home is that you become the homeowner. That means you can decorate the property however you wish!
Whether you have big creative dreams of primary-coloured bedrooms, or you want a wall of your favourite art, you can decorate in whatever style you want.
However, bear in mind that there might be structural improvements that you will need to gain permission for. You’ll need approval from the housing association if you want to:
- Fit a new kitchen
- Fit a new bathroom
- Build an extension.
If in doubt, always check with the housing association.
4. It’s only available to first-time buyers
Shared ownership is a helpful way for first-time buyers to get onto the housing ladder, as you can buy a share in a property with a smaller deposit and smaller mortgage.
While it’s ideal for first-time buyers, it’s also available to other homebuyers. As long as you are over the age of 18, meet the eligibility criteria, and you do not own another home (or you’re in the process of selling your current property), you can take advantage of shared ownership.
5. It’s more expensive as you’ll pay mortgage and rent
Under the scheme, you pay a mortgage on the percentage share you own and rent to the housing association for the other share.
As the rent you will pay will typically be below the market rate, your monthly payments on a shared ownership property can, in many cases, be lower than renting privately.
Remember that if you buy more shares in your home using staircasing, the rent you pay to the housing association will decrease.
6. You’ll still need a big deposit
One of the main advantages of buying using the shared ownership scheme is that you’ll typically need a smaller deposit than buying a home outright.
Your deposit will typically only need to be 5% of the share of the home you are going to buy.
Here’s an example.
If you were to purchase a 25% share of a £300,000 home – equating to £75,000 – your 5% deposit of this would be just £3,750.
When compared to buying a home on the open market, shared ownership deposits are generally much lower.
7. You can’t get a mortgage
This is not true. There are many lenders out there who are very happy to lend on a shared ownership property.
You’ll need to have saved the deposit the lender requires, and satisfy their affordability checks, such as whether you can afford the repayments based on your income and outgoings. You might also need to satisfy a lender’s credit checks.
If you’re thinking of buying a shared ownership home, it can pay to speak to a mortgage expert. They can scour the market for you and consider a range of mortgage options and help you to find a lender who is prepared to agree the mortgage you need. Please contact us if you have any questions about shared ownership mortgages.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
