8 Important Benefits of Shared Ownership

Shared Ownership Property

Shared ownership represents an intriguing and much-needed alternative to the traditional method of buying and selling a home. It is a government-backed scheme that is designed to help more people take their first steps onto the property ladder. 

With the scheme increasingly gaining in popularity, we’ve put together a list of the most important benefits of shared ownership and essential points to consider so you can make more informed decisions about whether it’s right for you. Read on to find out more.

What is a Shared Ownership Property?

Shared ownership properties enable individuals to part-own and part-rent a home in conjunction with a housing association. When you buy a home through a shared ownership, you enter into a shared ownership lease. The lease is a legal agreement between you (the ‘Leaseholder’) and the landlord which is usually a Housing Association. 

A buyer will purchase a percentage of the property (usually between 25% and 75%) via a mortgage, while paying rent on the remaining amount. It is then possible to buy more of the home over time using a process called staircasing

The conveyancing process for shared ownership properties is largely similar to the traditional method of buying and selling a home, the major difference being that you will usually have to deal with specialist mortgage brokers and solicitors. 

Benefits of Shared Ownership

There are many benefits of shared ownership; including enhanced flexibility and affordability, increased security, and a higher chance of being approved for a mortgage. There is also the potential to make a profit if the value of the property increases. 

The main advantages to shared ownership are: 

  1. More Affordable

One of the major benefits of shared ownership is that it makes owning a home more affordable for individuals who would otherwise struggle to get onto the property ladder. This is because the process generally requires a smaller deposit, due to the fact it’s based on the share value rather than the full market value of the property.

The lower mortgage value also means payments will usually be more affordable, since you’d be borrowing less. All of this makes shared ownership an attractive option for first-time buyers and those on a lower income.

  1. Increased Security

As a part-owner, leasing the property from a registered Housing Association, purchasing a shared ownership property means you will be afforded much more security than if you went with a private landlord. 

Because shared ownership properties are usually new build homes, you could also benefit from the security of a structural warranty for any defects for a period of between 10 to 12 years. 

  1. Higher Mortgage Approval Chance

The lower deposit amount required to secure a shared ownership mortgage also has a positive impact on approval rates. The reason for this is because you would be viewed as much less of a credit risk than if you were applying for a mortgage to buy a property outright. This can sometimes make the difference between approval and refusal, especially in the cases of people on low incomes. 

  1. More Cost-Effective than Renting

Another of the benefits of shared ownership is the fact that rental payments are often lower than those on the private market. Your Annual rent is calculated as 2.75% of the remaining share of the full market value owned by the Landlord/Housing association. The percentage share and rent amount will change depending on the amount you have been assessed for. You will receive a worked example by the housing association after a financial assessment. The rent is also reviewed yearly in accordance with the Retail Price Index.  

The scheme will also shield you from the volatility of the rental market, which has seen significant price increases in recent years. 

  1. Enhanced Flexibility

Shared ownership also offers the opportunity to increase your share of the property over time via staircasing. This is useful for individuals who may not be able to initially afford a large share, but may be able to acquire a greater percentage further down the line, if their financial situation improves. Staircasing can take place whenever you wish (or not at all), giving you total flexibility.

It is possible to staircase all the way to 100% ownership, at which point you would no longer have to pay any rent — just your mortgage and any associated service charges. At this point, you may even be able to purchase the freehold from the housing association, though this is less likely if you’re living in a flat or the shared ownership property is in a ‘Designated Area of Protection’. 

  1. Potential for Profit

Unlike traditional renting, shared ownership gives you the chance to make a profit on your share of your home if the property rises in value. If you decide to sell further down the line, this means you could end up with more money than you initially put in. 

  1. Long-Term Stability

Provided you keep up with repayments, you are able to live in a shared ownership property for the duration of your lease — which usually lasts for between 80 and 999 years. This enables you to enjoy your property for as long as you wish, while retaining complete flexibility over what you do with it. 

  1. Government Support

Because shared ownership is a government-backed scheme, there is support available for those who need it. This can include financial assistance when it comes to securing a mortgage or deposit. Knowing that you’re dealing with a government initiative can also make you feel much more secure about your position than if you were simply renting on the private market. 

To assess your eligibility, you need to register with a Help to Buy agent. 

You can apply to buy the home if both of the following apply: 

  • Your household income is £80,000.00 or less
  • You cannot afford all of the deposit and mortgage payments to buy a home that meets your needs. 

One of the following must also be true:

  • You’re a first-time buyer
  • You used to own a home but cannot afford to buy one now
  • You’re forming a new household e.g. after a relationship breakdown
  • You’re an existing shared owner and you want to move
  • You own a home and want to move but cannot afford a new home for your needs. 

Shared Ownership Points to Consider

While there are clearly many benefits of shared ownership, potential drawbacks do exist that you should be aware of. These include:

  • The smaller the share you own, the less you will be able to benefit from any increase in value
  • There are restrictions you will have to comply with set out in a standard shared ownership lease, this can restrict things such as renovations to the property. 
  • When staircasing, the price you will have to pay could increase over time
  • Selling a shared ownership property could be more difficult than with traditional conveyancing
  • Not all mortgage brokers will deal with shared ownership housing
  • There may be a limited choice of properties available in certain areas
  • There are a limited number of mortgage lenders that lend on shared ownership purchases. The mortgage lenders that do lend will have strict requirements that need to be met.
  • The value of some shared ownership properties may be slightly inflated so it’s important to check local sale prices to be sure. 

Because purchasing a property is a significant financial investment, it’s essential to speak to a specialist shared ownership solicitor who can assess your situation and help you make more informed decisions.

Regulatory - Thursfields notebook in hand

Bespoke Shared Ownership Support from Thursfields

If you’re looking to explore the benefits of shared ownership, you can rely on Thursfields to provide a service that’s tailored to your unique goals and circumstances. We have an in-depth knowledge of all areas of residential property, making us perfectly placed to assist whatever your situation may be.

From the outset, our residential property team can recommend whether shared ownership is right for you, and provide much-needed support throughout the conveyancing process should you decide to go ahead. Because we believe in providing a service for life, we can even assist with staircasing if you wish to purchase more of your property further down the line.
If you’d like to find out more about how Thursfields can help you take your first steps onto the property ladder with shared ownership, get in touch with our team today.

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