Shared Property Ownership: What you need to know.
It seems like a great idea. You can finally get your foot on the property ladder, only needing to find a mortgage for around half the value of the house, and then paying a subsidised rent on the other half. So, if you are a young family just starting out, and looking for a home in the area in which you want to settle, this could be the ideal solution for you. You could even buy the remaining share of the property from the Housing Association, and acquire 100% equity in the property in the long run. You can use these schemes to own your family home outright, unrestricted by a lease.
If, on the other hand, you are just starting out, looking to buy for the short term, and thinking of moving on in a couple of years, with no intention of buying a bigger share of the equity, you may find that shared ownership will be a frustrating process, with little capital gain to be made at the end of it.
Let’s consider the legal factors. The first is that you don’t ‘own’ your share. In fact you are a leaseholder of your share, and the property ownership, (the freehold), remains with the Housing Association. This means you are bound by the terms of the lease, which will require you to pay some maintenance and insurance costs to the Housing Association.
The rent will be reviewed upwards every year, and you will need the Housing Association’s consent to make any alterations to the property. If you fail to pay the rent, the Housing Association are entitled re-possess the property by terminating your lease, and you could forfeit the entire share in the property which you have acquired.
When you come to sell, if you are still a leaseholder, the lease usually provides that the Housing Association must have first refusal to buy and/or market the property on your behalf. The restrictions on who can buy it remain in place. Whilst this makes perfect sense, keeping the opportunity for others to get a step on the housing ladder, it might make your life harder, when you need to move on.
However, there are also advantages - you are on the housing ladder, subsidised by the Local Authority. And provided that the value of the property goes up, your ‘share’ in the equity will increase in value too.
And of course, if you can get the mortgage, it will usually work out cheaper than renting on the private market.
If you are looking to buy a Shared Ownership house, and need some advice on whether it is right for you, contact us today. We can guide you through the entire process, for a fixed fee.