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’s actually quite simple. You buy between 25% and 75% of a new 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 buying outright, and owning 100% of your home is ultimately the goal for many potential homeowners.
However, with rising house prices and increased costs of living, it’s not always as simple as that.
The average first-time buyer typically needs to save a massive £20,000 deposit to be able to get a mortgage on a home. This means that saving a deposit can typically take more than eight years, which has seen the average age of first-time buyers rise to 30.
So, while buying outright may seem ideal, for many people it’s not affordable to achieve this goal at any point in 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 eligibility here.
Shared ownership is a government-backed scheme to help people buy homes. And one of the reasons it exists is to form a bridge between renting and buying.
By purchasing an affordable percentage of your home, you are getting your foot on the property ladder and this could lead to owning outright in the future. There are a number of ways that shared ownership can help you achieve this goal.
You could ‘staircase’ up to 100%. This is where you buy larger shares of your home, allowing you 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 can use the proceeds from your equity 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 a brand new home that you can put 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 property further 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 the questions we most commonly get asked here and our team are on hand to answer any questions you might have – chat live online or call us on 01782 854748.
If you’d like any further information our team are here to help – you can email us at email@example.com, chat live online or call us on 01782 854748.