Shared ownership – also sometimes known as rent-to-own – is a part-buy, part-rent solution to getting on the property ladder.
The concept may sound confusing, but it’sactually quitesimple. Youbuybetween 25% and 75% of anew home. You take out a mortgage on the share you own and pay rent to a trusted housing provider on the remainder.
But, you may ask, why would you want to buy 25% (or even 75%) of a home when you could buy outright on the open market and own 100% of a home?
It’s a good question. There are many benefits to buyingoutright,andowning 100% of yourhome is ultimately thegoal formanypotential homeowners.
However, with rising house prices and increased costs of living, it’s not always as simple as that.
The average first-time buyertypically needsto save a massive £20,000depositto be able toget a mortgage ona home. Thismeans that saving a depositcan typically takemore thaneight years, which has seen the average age of first-time buyers rise to 30.
So, whilebuying outright may seemideal, for many people it’s not affordable to achieve this goal at any pointin the near future. In fact, if you can afford to buy a home outright, you may not even be eligible for shared ownership.You can find out more about shared ownership eligibilityhere.
Shared ownership is a government-backed scheme to help people buy homes. And one of thereasonsitexists is to form a bridge between renting and buying.
By purchasing an affordablepercentage of your home, you are getting yourfoot on the property ladder andthis could lead toowning outright in the future.There area number ofways that shared ownership can help you achieve this goal.
You could‘staircase’ up to 100%. Thisis where you buy larger shares of your home,allowingyou to gradually increase your share until you own 100% of the home.
Alternatively,you may one day choose to sell your shared ownership home – in which case you canuse the proceeds fromyourequity to put a deposit down on a home on the open market.By paying part rent and part mortgage, shared ownership homeowners are ensuring that a portion of their monthly payments go towards paying off their mortgage, which helps to put themselves in a better position to buy outright in the future.
However, shared ownership is not just ‘a means to an end’. It’s an increasingly popular way of getting on the property ladder with abrand newhome that you canput your own individual stamp on.
Many shared ownership buyers all over the UK decide not to staircase their shares or to sell their home. The part rent, part buy monthly payments often work out cheaper than private rent or mortgage payments.
There’s no right or wrong way to own a home. So, whether you want to staircase up to 100%,buy a different propertyfurther down the line, or remain happily in your home – the choice is yours!
Do you want to know more about shared ownership?We’ve answered thequestions we most commonly get asked here andour team are on hand to answer any questions you might have – chat live onlineor call us on 01782 854748.
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