10 reasons why it’s time to take a fresh look at Shared Ownership
Had it with the restrictions of renting, but can't quite afford the rising property prices? Shared Ownership is a great, affordable alternative! Here’s how you can step on to the housing ladder quicker than you think…
10: Greater affordability
The beauty of buying a Shared Ownership home is that the mortgage is smaller, which means that your initial deposit will also be smaller. We asked Ian Grice from our friends over at TMP The Mortgage People to explain more. “You’ll be buying a share that’s usually between 25% and 75% of the full market value of the home [which means that] the corresponding deposit is also smaller, usually between 5% and 10% of the share you're buying. Obviously, this is much more affordable than the deposit on a wider market mortgage.”
9: End of Help to Buy
If you were planning to buy through Help to Buy, the perhaps frustrating news is that the scheme has ended. However, the good news is that Shared Ownership has a lot going for it. For example, while Help to Buy meant that you could purchase a place with a lower deposit, Shared Ownership provides a both lower deposit (see point 10, above) AND a smaller mortgage.
8: Lower running costs
Shared Ownership homes are, in the majority of cases, new builds that are constructed with modern, energy-saving materials that could actually save homeowners up to £2,600 per year. The Government uses a system called the Energy Performance Certificate (EPC) to rate the energy and environmental performance of our homes – a higher EPC rating means potentially lower running costs and even peace of mind when it comes to your carbon footprint.
Also, as Kalumba Musambachime, Head of Sales and Build to Rent at Network Homes, adds, “The Minimum Energy Efficiency Standards (MEES) regulations require buildings with new tenancies (which includes Shared Ownership homes) to achieve a minimum EPC rating of E before they can be let to new tenants.
“From April 2023 the same rule will apply to all existing leases, meaning your Shared Ownership home will be guaranteed to have a super-efficient energy performance. In fact, our average (SAP) rating is 72 (band C). And our rating is higher than the national average for social housing, which is 68!”
7: Keep rates under control
While there’s been a lot of talk about big interest rate rises in the wider market recently, Shared Ownership is insulated from the most alarming rises. Here’s why: through Shared Ownership, you’re buying a percentage of a property, which means a percentage of the mortgage amount, rather than the full mortgage. So the real-term rising costs are quite a bit lower than for a house bought on the wider market.
TMP The Mortgage People’s Ian Grice explains more: “If you were borrowing a large figure of say £200,000-£300,000 for a property in the wider market, then going from an interest rate of around 2-3% up to 5-6% will make a big difference to your monthly payments. But with Shared Ownership, the real term additional monthly costs might only be about £50 in many cases, and as low as £10 in some. It’s easy to look at the top figure and become disillusioned, but Shared Ownership works differently.”
Despite the high quality of new home build standards, sometimes repairs may be needed. But not to worry, the majority of new builds have essential repairs guarantees that cover you for any major financial headaches caused by problems with the building. Ten years is the standard length of cover – that’s a decent amount of peace-of-mind when compared to renting.
5: Get on the property ladder
As in the wider market, the proportion of Shared Ownership home that you own will grow in value if the price of the property goes up. Also, through staircasing, you can eventually own 100% of the property outright! Once you’ve done this you may also be able to buy the freehold from the housing association.
4: More flexibility
With a Shared Ownership home, you can sell the shares you own back to the housing association at any time.
3: It’s your space
If you want to do something like repaint the walls or hang a shelf, you don’t have to check with your landlord as you would do if you were renting on the private market. But it should be noted that any significant alternations – such as knocking down a wall or adding a conservatory to a Shared Ownership home – will need approval.
2: Less tax
Stamp Duty is an often-overlooked tax that can come as a nasty surprise. However, if you’re a second time buyer you can opt to pay it only on the specific share of the Shared Ownership home that you’re buying. And if you’re a first-time buyer, you typically pay no Stamp Duty on the first £300,000 of the property price.
1: Next steps
As Kalumba explains, “If Shared Ownership sounds like it might work for you, the first step is to take a look at what’s available to you. Check out our website. You can also start thinking about what you can realistically afford – get an assessment over at TMP The Mortgage People.”