Is shared ownership worth it in 2021?
Shared ownership: Expert explains ‘equity sharing’
Shared ownership allows buyers to purchase a share of a property and pay rent on the remaining share – dramatically reducing the amount required for a deposit. Thinking about going ahead with a shared ownership this year? Here’s everything you need to know, according to David McGrail, Compliance Director at firstmortgage.co.uk and Gascoines’ office manager Jess Mitchell.
There are so many positives when it comes to shared ownership.
The scheme is a middle ground between renting and buying and gets rid of the pressure to save a huge deposit that first-time buyers face.
Mr McGrail said: “Generally speaking, a low deposit is required which provides a route to purchase for those that are struggling to raise sufficient deposit to buy in their own right.
“They may be able to buy a nicer property than they could otherwise afford.”
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Ms Mitchell said the biggest benefit is that you can increase the percentage that you own in the future if you want.
She said: “The ultimate benefit with shared ownership is you can increase your share in the property over time, but only if you can afford to and you won’t be able to buy more shares until you’ve built up further savings.”
The monthly housing costs will be lower than buying or renting and the upfront costs won’t be as much as if you were buying a home.
However, although shared ownership is easier to achieve than full ownership, it may cost you more than buying a home in the long run.
A smaller deposit makes shared ownership more appealing in the short term, but you may be better off buying a home outright.
Mr McGrail said: “You will have to pay a rent to the housing association in addition to your mortgage payment.
“If you are able to provide enough deposit, it may be better to buy outright and have a larger mortgage payment rather than a combination of mortgage payment and rent.
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Is shared ownership worth it in 2021?
Nothing in the world seems risk-free at the moment, with the pandemic impacting every aspect of our daily lives.
However, the experts have stated that shared ownership is still a good decision in 2021.
Mr McGrail said: “Home ownership is always worth it! This year is no different”
Ms Mitchell added: “Shared ownership is a great way for first time buyers to get onto the property ladder and a way of taking the steps to own your first home without the need for a hefty deposit upfront.
“It is a less risky way to purchase your first home as you part-rent, part-buy your property and then when you’re in a more comfortable position, you have the option to buy a bigger share of your house.”
Who is eligible for shared ownership?
To be eligible for shared ownership, the following must apply:
- Your annual household income must be no more than £80,000.
- You cannot be a current homeowner (or be named on the deeds of another property) however consideration is given to buyers who are starting again, following a break up for example.
- You must not have any outstanding credit issues (i.e. unsatisfied defaults or county court judgments).
- You should be unable to purchase a home suitable for your needs without assistance
If you decide to go forward with a shared ownership scheme this year, there are a few things you should consider, according to the experts.
Mr McGrail advised: “Consider the full cost of the arrangement in terms of rent and mortgage payment.
“Investigate all other schemes with an adviser to ensure there is not an alternative scheme which may allow you to buy in your own right.”
Ms Mitchell recommends considering your long-term goals before you make a decision.
She said: “There are lots of extras and benefits to moving into a new build property and with shared ownership, many new homes come fully carpeted, with white goods, a turfed garden, toilet and towel holders.
“These are costly elements, so if you were to do it alone it’s always worth bearing in mind.”
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