I’m a massive fan of shared ownership. If you are not yet not he housing ladder in London and would like a leg up then this is the scheme for you.
I have seen first hand how beneficial this is, having my partner use and one of my best friends. Essentially you buy a % of a property from a local housing provider and pay rent on the % you don’t own. Then, as you save more money, you can buy out the rest of it until you own 100%.
You will need to have some savings to start with as you will have to put down a deposit on the % of the property you own and then top this up with a mortgage so that you have paid for your %. The good news is that in some cases the deposit can be as little as £5,000, which isn’t scary. You should also budget for legal fees alongside this which will be circa £2,000 and stamp duty. There are 2 ways to pay:
- Make a one-off payment based on the total market value of the property – this is making a ‘market value election’ for SDLT.
- Or, pay any SDLT due in stages – you pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property (the gamble here is that the market price of the property could fluctuate meaning STLP will change with it).
The good news with shared ownership is that if you don’t already have legal or mortgage advice the housing providers are on hand to provide this support.
Another huge benefit of this scheme is that usually it can be found on new build property and therefore you can end up with a plush new flat with a 10 year warrantee.
Obviously with any glorious scheme there are some downsides. There are often hundreds of applicants for a limited number of properties – in my partners case 400 for 24 flats. However don’t be too deterred by this as you can apply for other flats and you can even buy re-sell shared ownership properties from specialist sites such as Share to Buy.
Other disadvantages are that once in the property if the value of the property goes up then the cost of buying subsequent shares will also go up, so you will need to be constantly topping up your savings to keep up with the seemingly endless rise in flat values. If you do have some patience, speak to your mortgage adviser first, then you could recycle your original deposit. If the value of your property increases then so will the amount of capital you own within it. If you are savvy you could remortgage, take out the excess capital you have made and reinvest it in another share of the property – thus owning an increased % without the cost… ingenious huh!!
Finally you cannot take part in this scheme if you already own a property and there are rigorous checks to make sure you are a suitable candidate. Therefore start the application process before looking – you can do this through your local council or housing providers who take part in the scheme.
However with all the disadvantages aside, if you dot make part in the scheme you will be a property owner, paying a mortgage towards something you own and this is very exciting – therefore if you can find a way of doing this why wouldn’t you? Don’t be dejected if you can’t afford 100% of a property as a first time buyer, this is the best and most proactive step you can take to get on that crucial first rung – its never quite so hard to upsize after that (or at least I don’t think so).
As you can see I’m a real advocate for this scheme and if you ever need me to champion you through the process then please do not hesitate to get in contact with me [email protected]. Even when you think its getting tough I promise to be your cheerleader no matter what! Good luck if you choose this route, it is incredibly satisfying.
NC
