The dream of owning a home shouldn’t be out of reach for everyone. In the United Kingdom, Shared Ownership mortgages have emerged as a popular solution, allowing people to take a step onto the property ladder. Combining the benefits of renting and homeownership, this unique scheme has both advantages and concerns worth exploring, which we will in our handy Evermore Mortgage Brokers blog below!
What is Shared Ownership Mortgage?
Shared ownership mortgages in the UK are government-backed initiatives aimed at assisting individuals or households who cannot afford to buy a home outright. Under this scheme, prospective buyers can purchase a share, typically 25% to 75%, of a property directly from a housing association or private developer. The remaining share is then rented out at an affordable rate. Over time, homeowners have the option to increase their ownership share (a process known as “staircasing”). Find out more on the Government website.
Benefits of Shared Ownership Mortgage:
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Affordability: One of the standout benefits of shared ownership mortgages is the reduced deposit required to secure a property. Buyers only need a deposit on their share, which is generally much smaller than what is needed for traditional homeownership.
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Stepping Stone: Shared ownership acts as a stepping stone for many who cannot immediately afford full ownership, allowing them to enter the property market and start building equity. As financial circumstances improve, homeowners can purchase more shares, eventually achieving full ownership if desired.
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Lower Monthly Costs: The combination of mortgage payments and subsidised rent often results in lower monthly costs compared to renting privately or securing a traditional mortgage. This affordability opens up homeownership opportunities to a broader range of individuals and families.
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Security and Stability: Having a stake in a property provides a sense of security and stability that renting cannot always offer. Shared ownership tenants have control over their living environment, can decorate, and enjoy the benefits of homeownership!
Concerns Associated with Shared Ownership Mortgage:
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Resale Challenges: Homeowners who wish to sell their shared ownership property sometimes face difficulties due to limited market demand. The availability of buyers with the necessary shared ownership mortgage eligibility can affect the speed and ease of resale.
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Limited Choice: Shared ownership properties are typically limited to specific developments in partnership with housing associations or private developers. This might leave buyers with fewer options in terms of locations, property types, or architectural styles.
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Shared Responsibilities: Shared ownership tenants still face responsibilities associated with homeownership, such as maintenance costs, repair works, and service charges. It is crucial to consider these factors when determining the affordability of shared ownership.
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Mortgage Availability: While shared ownership mortgages have grown in popularity, it is worth noting that not all lenders offer this type of finance. Limited mortgage options could potentially hinder the ability to secure a suitable mortgage deal.
Conclusion:
Shared ownership mortgages in the UK present an opportunity for aspiring homeowners to take their first steps onto the property ladder. Despite potential concerns such as resale difficulties and limited choices, the scheme showcases substantial benefits, including affordability, lower monthly costs, and increased security.
As the demand for accessible homeownership grows, it is crucial for the government, housing associations, and private developers to work together to expand the availability and variety of shared ownership properties. Only through collaborative efforts can this scheme continue to empower individuals and families to navigate the property market successfully. We have significant experience in this field at Evermore Mortgage Brokers and would be delighted to assist you, please use our Contact Form to get in touch!
