Are you considering purchasing a property, but the upfront cost seems too large? You may benefit from shared ownership. Shared ownership offers prospective buyers the ability to purchase part of a property and pay rent on what they do not own rather than facing one lump sum payment for an entire property.
This scheme is ideally suited to those who find it difficult securing a mortgage and allows prospective owners to gradually gain more equity in their home as time goes on.
In this blog post, we will explore what shared ownership is, how it works, who would typically use shared ownership schemes and its advantages & disadvantages.
What is Shared Ownership and how does the scheme work?
Shared ownership is an attractive housing solution in the UK, particularly when it comes to private renters who want a piece of the property ladder. The scheme works by allowing the buyer to purchase a portion of the property while paying rent on the remainder – usually owning between 25% and 75%.
This makes it more achievable for someone who may otherwise not have been able to buy such a property due to their financial circumstances. It is suited to those people looking for long term stability in their lifestyle as well as individuals with changing financial conditions; however, not all applicants are accepted depending on their level of income and who they are buying from.
As with any scheme there are advantages and disadvantages, but done responsibly shared ownership can be an effective way of achieving home ownership.
Who is best suited to Shared Ownership & why
Shared Ownership is a great scheme for those who are looking to get on the property ladder but may not have the funds to cover it all in one go. It can be a great option for first-time buyers, those with low incomes and people whose circumstances won’t allow them to pay off a mortgage in full.
Through Shared Ownership, you purchase only what you can afford – usually up to 75% of the total property price – with a small mortgage or loan, while renting the remaining percentage from the housing association or local authority. With advantages such as being able to buy in your dream area and owning an asset that will appreciate, there are also some potential issues to consider such as maintenance costs.
Ultimately, Shared Ownership presents an opportunity for more people who wouldn’t otherwise have been able to access homeownership and provides the chance for them to get onto the property ladder.
Advantages and Disadvantages of shared ownership
Shared ownership is an attractive option for prospective homebuyers who may not have the funds needed to purchase a home outright. With this scheme, individuals purchase a portion of their home while paying rent on the remainder, usually to a housing association.
For many, it offers a viable solution to getting onto the housing ladder. Despite the potential advantages, such as being able to dive into homeownership without having to face a large one time payment, there are some drawbacks that should be considered before committing to shared ownership.
These include higher mortgage rates and fees than are associated with conventional mortgages, as well as fewer opportunities for financial equity since buyers are only purchasing part of their property. Still, in many cases these negatives can be outweighed by the benefits that shared ownership brings.
Eligibility criteria for shared ownership
Shared ownership allows individuals to become part-owners of property by purchasing a share from a housing organisation that retains the remainder. It has become an attractive, cost-effective way for many to get on the property ladder, but not everyone is eligible.
There are several criteria that must be met in order to qualify. These criteria can vary depending on individual circumstances and housing organisation requirements, however generally include being a UK resident aged 18 or over; having an income below £80,000; being unable to afford conventional mortgage payments; and having sufficient savings for a deposit.
Those taking on shared ownership would need to consider fully the advantages and disadvantages before doing so, and make sure they meet the eligibility criteria set out by their chosen housing organisations.
How to apply for shared ownership
If you are becoming a homeowner for the first time and don’t have enough money to buy a property outright, shared ownership could be the perfect housing solution. It is suited to many people but particularly those on lower incomes or who may not be able to get access to a mortgage for traditional home ownership.
To apply for shared ownership, you will need to register with your local council or Home Ownership Centre and confirm that you meet their eligibility criteria. Once approved, you can start looking at properties and complete your purchase by taking out a mortgage.
The advantages of purchasing through the scheme include having access to discounted prices for part shares in properties, and avoiding some additional costs associated with buying. However, before proceeding any further it is important to carefully consider all the potential disadvantages as well such as complicated paperwork and administrative tasks.
Financial considerations when considering shared ownership
Purchasing property through shared ownership comes with a lot of different financial considerations. This scheme offers potential buyers the opportunity to own a larger portion of their home sooner than they may otherwise be able to achieve through keeping a 20% deposit and taking out a loan for the remaining amount.https://expertcivil.com/9-indisputable-reasons-to-invest-in-real-estate/
To do this, you will need to weigh up both the advantages and the disadvantages of this option; understanding that there is an initial up-front cost as well as ongoing costs after purchase, such as renting your own share from your housing association or local authority.
Generally speaking, shared ownership is best suited to people who are looking to get onto the property ladder quickly, but can’t afford the traditionally high starting costs associated with buying a house outright or via other schemes. If you’re considering using this scheme and considering taking on shared ownership of a property, it’s important to carefully consider all aspects before moving forward.
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