The property market in the UK is incredibly strong and competitive, which means that it can be difficult to secure a home that suits your needs. Price barriers can prove to be quite a challenge for prospective homeowners - especially first-time buyers with little equity - which is why the shared ownership scheme was rolled out by the UK Government. This scheme aims to make it easier for people to step onto the property ladder – providing they meet the eligibility criteria. So, to help you determine whether or not this scheme is suitable for you, this article will look at what shared ownership is, how it works and more.
The Basics of Shared Ownership
The shared ownership scheme is a part-buy, part-rent system rolled out by the UK Government. Buyers typically purchase between 25% and 75% of a home's value (although this can be a minimum of 10%) and pay rent on the remaining share, which is owned by a developer or housing association. The percentage of the home bought can usually be increased over time, a process known as staircasing. This flexibility allows homeowners to gradually increase their ownership stake as their financial circumstances improve.
Shared Ownership Eligibility
Eligibility for shared ownership is typically restricted to first-time buyers, people who used to own a home but can't afford to buy one now, or existing shared owners moving to another property. Additional criteria to meet includes having a maximum household income and sometimes a requirement to have a connection to the local area.
When purchasing a shared ownership property, the buyer pays a deposit on the share they are buying, not the full market value of the home. This deposit is therefore generally much lower than would be required when purchasing a home outright, making it a more attainable option for many.
The Benefits of Shared Ownership
Shared ownership schemes offer a variety of benefits that make them an attractive option for individuals struggling with the high costs of entering the housing market. Here are some key advantages:
Affordability
The most significant benefit of shared ownership is its affordability. By purchasing only a portion of a property, buyers reduce the amount required for a deposit and decrease the size of the mortgage needed. This makes homeownership feasible for many who cannot afford the high initial costs of buying a home outright. Prospective homeowners can look at shared ownership developments such as Green Vale in Evesham for top-quality new build properties.
Step-by-Step Ownership
Shared ownership provides a unique opportunity for homeowners to increase their equity in a property gradually. “Staircasing” allows owners to purchase additional shares of their home when they can afford to do so. In most cases, buyers can eventually own 100% of the property, transitioning from part-owners to full homeowners at a pace that suits their financial situation. This may vary per development and is not always possible, so ensure you check your staircasing options before purchasing a shared ownership home.
Financial Security
Owning a home through shared ownership can offer more stability than renting. It provides homeowners with security and the peace of mind that comes from knowing they have a long-term place to live. Moreover, as mortgage payments are made and additional shares are bought, homeowners increase their stake, reducing the portion of rent paid and enhancing their financial stability over time.
Potential for Capital Growth
Shared ownership offers the potential for capital growth. As owners invest in more shares and if the property value increases, they stand to gain a larger return on their investment. This can be particularly advantageous in high-growth areas where property prices are expected to rise. So, looking into upcoming shared ownership developments - such as Bournleigh in Banbury - you can find a new build property that may yield strong profits for you in the future.
Is Shared Ownership Right for You?
For those struggling to get onto the property ladder, shared ownership could offer a viable and accessible path to homeownership. Securing a mortgage is prohibitively expensive for many people, and shared ownership gives those individuals a better chance of purchasing a property that they can call home. If you have any questions about shared ownership or would like help finding your perfect new build shared ownership home, please contact our team at Sanctuary today. Alternatively, visit our shared ownership information hub to find out more.