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  • Buying Property in Shared Ownership? 5 things to Know

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  • 6.5 M
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  • 7.5 M
  • 8 M
  • 8.5 M
  • 400
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Dated:
Jun 15, 2023
Read Time:
Topic:
Development, London

Buying Property in Shared Ownership? 5 things to Know

Are you struggling to own a property? Shared ownership is the answer for you. Shared ownership houses require small deposits and fewer monthly payments. In addition, the individual can purchase shared ownership property with cash payments or a mortgage. The corresponding mortgage payments will increase or decrease according to the deposit amount.

What are Shared ownership houses?

Shared ownership allows first-time property investors and homebuyers to purchase a home. It can be a new home or a resold property. When an applicant buys a share in a property, they pay the mortgage accordingly. In addition, the part-owner also pays rent on the remaining share. The initial is also reduced because the property does not involve an absolute owner.

If the buyer wishes to own more shares in the property, they can contact the lender. The process is known as staircasing and is one of the advantages of shared ownership. However, the applicant will pay legal costs each time you increase your share. Furthermore, housing authorities also have a ceiling on how many times an individual can staircase.

Even though shared ownership means a small deposit, the applicant must pay

  1. Rent of the remaining portion
  2. Monthly service charges according to the scale of the property
  3. Ground rent

Shared ownership involves houses, flats, existing homes, and new properties. In addition, shared ownership is a kind of leasehold, an unconventional market practice. You can read more about shared ownership here.

Pros and Cons of Shared Ownership

Pros

  1. The individual will save on stamp duty, increasing the purchase cost.
  2. The part-owner can sell or transfer the shares at any time. It will make the transfer of title valid.
  3. Thirdly, deposits on shared ownership are lower than the pricing trends in the open market.
  4. The shared ownership approach does not burden your finances. It results in a long-term investment with fewer risks.
  5. Payments related to shared ownership are less than conventional mortgages. The payments are lowered if the applicant also rents.
  6. Staircasing means the part-owner can purchase additional shares in the property over the course of ownership. If the individual owns 100% of the shares over time, they will not pay rent.

Cons

  1. The applicant must search for a lender that offers shared ownership which is a tedious process.
  2. Regardless of the shared, shared ownership applicant must pay service expenses.
  3. When the shared ownership grows more than 80%, the applicant must pay stamp duty for the entire property. (Source)
  4. Shared ownership has restrictions on decorating. The applicant must contact the lender or service provider for grand-scale renovation. The applicant makes structural changes to the property until the relevant authorities approve it.

What is the shared owner eligibility in the UK?

You must meet the following requirements to purchase a shared ownership property:

  1. The individual makes less than £80,000. The condition applies if they reside outside London.
  2. The individual makes less than £90,000. The condition applies if they live in London.
  3. The individual cannot own another property or home. Shared ownership applies to first-time buyers. If you already own a property, you must sell it before seeking shared ownership.
  4. The individual must not be able to earn and provide sufficient housing according to market trends.
  5. The individual must not owe rent payments or mortgages.
  6. The individual must be of legal age.
  7. The applicant has a good credit history. In other words, no payments are owed according to the County Court Judgements. In addition, the applicant can make regular payments and keep up with the home purchase costs.

The UK practices dictate that the applicant must pay five to ten per cent as a deposit. Moreover, the individual must also have £4000 for buying costs. You can read from the source here!

Can you make a profit on shared ownership?

Unfortunately, selling shared ownership is difficult. The procedure is complicated because few buyers are interested in shared ownership properties. Therefore, they may back off from the purchase. Buyers in the market wish to purchase property with a 100% absolute owner to simplify technicalities.

However, selling a property with shard ownership is possible for a profit. The amount you sell beyond the initial buying cost is distributed according to the shares.

A 25% share in property valued at £100,000 means the shares in the property are £25,000.

The owner sells the property at £150,000. So, their shares increase to £37,500.

The profit earned from the sale is £50,000. The individual sees an increase in their share of £12,500.

Even though the property was sold at a profit, its selling value was decided by the RICS valuation. It eliminates the bidding war of potential buyers who seek a better price. The profit on a shared property depends on the valuation. Therefore, the upkeep of shared property is necessary to maintain a high return on investment.

Buying a shared ownership property without a mortgage

In short, yes, you can buy a shared property without a mortgage. The procedure has no requirements. Furthermore, there is no eligibility criterion either. If the applicant has a cash amount ready to spend, they can easily purchase shared ownership without a mortgage.

Shared ownership is a market concept that applies to first-time buyers to improve the standard of living. The government hopes the property industry will prosper while also providing long-term employment. When you buy a shared ownership without a mortgage, the applicant owns a specific part of the home. On the other hand, they pay rent for the portion of the property they do not own.

Let TRPE help you with shared ownership properties

Shared ownership is an excellent incentive for individuals to indulge in properties and strengthen their finances. The procedure requires a systematic approach and communication with the lender. If you wish to know more about shared ownership, we insist you contact TRPE.

With TRPE, you become a proud owner of a shared owner. Say hello to being a landlord after the lease is granted. Our experts will present a wide variety of properties you can call your home. Dial +44 2077 232 393 to talk to our real-estate minds. You can also email us at [email protected]

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