Government Schemes - Shared ownership

Last updated: March 2021 | 2 min read

Shared ownership scheme can be beneficial for you if you cannot afford or borrow enough to buy a home on the open market. This article will take you through all you need to know about the shared ownership scheme.

What is shared ownership?

If you meet the eligibility criteria to get a mortgage, then the shared ownership scheme allows you to buy a portion of the property while paying rent on the rest to the housing association or private developer which owns that building. The rent is charged below-market rates.

Usually, shared ownership properties are leaseholds. Consequently, you will have to pay a monthly service charge and contribute to substantial maintenance works.

You can also buy the home through staircasing the payments.

What are the disadvantages of shared ownership?

Maintenance charges

Though shared ownership will in all probability be cheaper than buying a property on the open market, you will be paying maintenance charges which may even increase in the future. Additionally, you will have to pay a monthly service charge and for major maintenance works.

You cannot sublet

Generally, there is a restriction on whether you can sub-let the property. In the majority of cases, it is not allowed.

Buying the property can be expensive

You will have to pay a valuation fee, legal expenses, stamp duty, and mortgages fee. All of this might be too much for you when you are planning on how you can buy the rest of the property in a shared ownership home.

You will face restrictions

As you will have a lease on the remaining portion of the property, there will be restrictions and duties relating to the part you rent. You should check your lease to find out which restrictions and obligations you have.

Selling your share can be difficult

The process is not as straight forward as compared to non shared ownership homes. Firstly, you will have to ask the housing provider if they want to buy it since, usually, they have the first right of refusal.

After the housing provider has failed to arrange a buyer within a certain period, you can market your share for sale or use an estate agent.

However, you should check out our article on what to watch out for in an estate agents contract before you hire one.

Negative equity

As through the shared ownership scheme, you can only buy a new build home, you should plan on staying there in the long term. This is because when you purchase the property, it will be brand new, but as soon as you move in, it will depreciate in value. So you may lose money if you try to move out.

No additional protection

The costs can increase as the maintenance charges, and rent is likely to go up in the future. Additionally, it will be your responsibility to repay the mortgage loan.

You can also face eviction if you fall in arrears on your rent. Therefore, just because this is a government scheme does not mean you will have more protection.

Click here if you want to learn about the other affordable home ownership government schemes.

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