In a world where escalating property costs are preventing many first time buyers from purchasing their first property, numerous schemes are now being developed, within both the public and commercial sectors, to allow individuals to purchase a property that they would not otherwise be able to afford.
Shared ownership mortgage allows an individual to purchase a percentage of the property, such as 25 percent or 50 percent, and to pay rent on the remaining portion. This way, an individual is able to begin the process of owning their own property and reducing their monthly bills whilst still being able to obtain the necessary mortgage.
Most shared ownership properties are available to purchase from a housing association, with the remaining percentage of the property's value being paid for through a monthly rental payment. Apart from housing associations, some commercial vendors have also spotted the potential in the shared ownership market. They are now offering shared ownership style schemes in order to encourage those who would not necessarily be eligible for housing association properties to consider this method of purchasing a property, which they would not otherwise be able to afford.
Although the vast majority of properties offered on a shared ownership basis are from housing associations and are, therefore, housing association properties, which are normally flats or terraced properties in more populated areas, there are some commercial companies now offering properties for shared ownership.
With commercial companies, the choice of property is likely to be more varied, possibly in less populated areas or in other more rural areas. Of course, with a commercial company, the terms are variable and prospective purchasers will have to make further enquiries, on an individual basis, as the process is not regulated centrally by government.
Although the basic principle of shared ownership remains the same, across the various different schemes, there are some subtle differences which should be borne in mind when trying to select the best overall package for your individual needs.
Home Buy is a scheme that is, in theory, available to anyone who fits the eligibility criteria (more about this later). However, priority is given to current council and housing association tenants. In reality, this means non-council tenants will not generally be in a position to take advantage of the home buy scheme.
With Home Buy, the purchaser is still only purchasing a percentage of the property which is normally 75 percent. But, instead of paying rental on the remaining 25 percent, purchasers will be given a loan by the housing association for the value of the property, with the loan not being re-payable until the property is sold.
Property is selected by the purchaser on the open market and, therefore, purchasers are not restricted to the property or even the region that they currently live in.
This scheme still requires the assistance of a housing association and works by the purchaser selecting the property they want to buy on the open market and then asking the housing association to purchase the remaining share of the property that the purchaser is unable to afford. Again, this is normally based on a 75 percent to 25 percent share, although this ratio can sometimes be negotiated.
Unlike the Home Buy scheme, the do it yourself strategy requires the purchaser to pay rent on the 25 percent share that is owned by the housing association. The advantage of this scheme is that the purchaser gets a free choice of the property that they can purchase. There is, however, an ongoing rental cost which makes this a pricier option compared with the Home Buy scheme.
Companies are now realising how popular the idea of shared ownership is and are offering the option to all potential purchasers. Commercial companies have total freedom in what they offer, which means that you can have a wide variety of options, including schemes that are similar to the Home Buy with no rental or, alternatively, do it yourself where a rental is payable. This offers a much wider choice of properties and flexibility in terms of the structuring of the finance. On the downside, there are not the same strict government regulations as housing associations have to comply with; this means that that any purchaser will have to be more astute and prepared to bargain, on an individual basis.