Shared ownership is an excellent way to get a stake in a property when you cannot afford to buy it outright. This stake is usually 25% and 75% of the property; the rest is cleared by paying rent. This rent is charged at a discounted fee, and the cost of home ownership is made affordable under this scheme.
Remember, the properties are mainly leasehold properties, and owners should pay a monthly fee and contribute to maintenance works. Shared ownership allows potential buyers to purchase more of the home by “staircasing”. This move involves increasing your share, which reduces your rent. Visit moathomes.co.uk/county/Shared-Ownership-Kent/Maidstone for more information.
Private developers or housing associations offer shared ownership programs. The restrictions and costs depend on the provider, and potential buyers should research their benefits. Below we discuss what to watch out for in shared ownership.
Downsides of a Shared Ownership
Below we discuss the main downsides of shared ownership;
1. Maintenance Charges
Monthly mortgage repayments and rent are much cheaper than buying a property outright. However, do not forget to include maintenance charges and prepare for potential increases in the future. Potential buyers should also enquire how they will pay for more significant tasks like roof maintenance.
Buyers should also know they are tasked with paying the complete repair and maintenance costs even though they have a thirty percent stake in the property. There are also restrictions concerning whether you can rent the property out or not. However, sub-letting is not allowed in most cases.
2. It Is Expensive to Increase Your Property’s Shares
“Staircasing” or increasing a stake in your property is expensive as it entails the following costs;
- Valuation fee: the housing provider will instruct a surveyor to confirm the property’s current market valuation.
- Stamp duty: people not eligible for a first-time buyer’s relief can pay in two ways. The first entails one-off advance payments, and the other is paid in stages.
- Legal expenses: staircasing involves making changes to your lease, a process that needs a solicitor.
- Mortgage fees: the lender’s valuation fees are paid when applying to change lenders.
It will help to check with your housing provider to confirm whether there are any restrictions when buying a more significant share of your property.
3. Has Restrictions
Check for any restrictions within your lease before trying the shared ownership program. Buyers are likely to ask for the provider’s permission before making significant alterations to the property. This request should be written, and some leases require redecorating permissions.
4. Negative Equity
Buying a new property is more likely to make sense if a buyer can stay put for several years. This is because new-build properties entail an additional premium, and the price depreciates immediately you move in. Buyers are still likely to fall into negative equity and lose funds when they try to move.
Consider being honest on the property you desire to avoid being trapped; suppose negative equity occurs.
Shared ownership has become increasingly common in the past few years, and it is hard not to see why. The above article has discussed what to look for, and you can reach out for more information.