Investing in property is one of the most popular ways to increase your wealth. However, buying a property outright can be a daunting task, especially for first-time buyers or those with limited funds. For those in this situation, shared ownership is an attractive option. Here’s what you need to know about shared ownership as a property investment option.
Shared ownership, also known as “part buy, part rent”, is a scheme that allows you to purchase a percentage of a property and rent the rest from a housing association or a developer. Typically, the buyer owns a portion of the property, ranging from 25% to 75%, and pays rent on the remaining share. The scheme is often available for new build homes or properties that are being resold.
One of the key benefits of shared ownership is that it allows you to get onto the property ladder with a smaller deposit and mortgage. You can choose the percentage of the property that you want to own, typically between 25% and 75%, depending on your budget. The initial deposit and mortgage you need will be based on your percentage of ownership. This makes it an affordable option for those who may not have the funds available to buy a property outright.
Another advantage of shared ownership is that it allows you to increase your equity over time. You can eventually purchase additional shares in the property as and when you can afford to, which means you will own a larger proportion of your home. This will also reduce the amount of rent you will have to pay. With each share purchase, the housing association or the developer will value the home, and you will pay the market value of the new share.
However, shared ownership is not always the best option. One of the main disadvantages is that you may be limited in the types and locations of property available. This is because the scheme is aimed at people who cannot afford to buy a property outright, so it’s more likely that you’ll find shared ownership properties in less desirable locations or with fewer features. Furthermore, the scheme is also only available for new-build homes or properties that are being resold by existing shared owners.
Another downside to shared ownership is that you may be responsible for additional costs, such as service charges and maintenance fees. While these costs are generally lower than what you would pay as an outright owner, they still need to be factored into your budget.
Overall, shared ownership can be an excellent option for those looking to get onto the property ladder with a smaller deposit and mortgage. However, it’s important to consider the pros and cons before making a decision. You should also speak to a mortgage advisor and a solicitor to ensure you fully understand the scheme and your obligations.