Shared ownership pros & cons

Shared ownership overview

Shared ownership is a housing scheme that allows individuals to part-buy and part-rent a property. It has gained popularity in recent years as a way for people to get onto the property ladder, particularly in areas with high housing prices. 

However, like any financial decision, there are pros and cons to consider before committing to shared ownership. 

Learn in more details about how shared ownership works in our guide: Shared ownership explained.

The pros of shared ownership

More affordable

One of the main benefits of shared ownership is that it can make owning a property more affordable for those who cannot afford to buy a property outright. By only needing to purchase a share of the property, buyers can reduce the amount of money they need to borrow and therefore lower their monthly mortgage payments. This can be a significant advantage for first-time buyers or those on lower incomes, making homeownership a more achievable goal.

Opportunity to increase ownership

Shared ownership also offers the opportunity for buyers to increase their ownership over time. This is known as staircasing and allows buyers to purchase additional shares in the property, eventually leading to full ownership. This can be a great option for those who may not be able to afford a larger share initially but can increase their ownership as their financial situation improves. It provides a flexible approach to homeownership, allowing buyers to adapt their level of ownership to suit their changing financial circumstances.

Government support

Shared ownership is a government-backed scheme, which means that there is support available for those looking to purchase a property through this scheme. This can include financial assistance with the deposit or mortgage, making it a more viable option for potential homeowners. The government's backing of the scheme also provides a level of security for buyers, knowing that there is a structured process in place to support their journey to homeownership.

Potential for profit

As with any property ownership, there is the potential for profit with shared ownership. If the property increases in value, the buyer's share will also increase in value, allowing them to make a profit if they choose to sell their share in the future. This potential for capital growth can make shared ownership an attractive investment opportunity, as well as a stepping stone to full homeownership.

The cons of shared ownership

Limited choice of properties

One of the main drawbacks of shared ownership is the limited choice of properties available. Shared ownership properties are usually new build or existing properties being sold by housing associations, which means that there may not be a wide range of options available in certain areas. This can make it difficult for buyers to find a property that meets their needs and preferences. It can also limit the buyer's ability to live in a specific location or type of property.

Additional costs

While shared ownership can make owning a property more affordable, there are still additional costs to consider. Buyers will need to pay for their share of the property, as well as any associated fees such as legal fees and stamp duty. They will also be responsible for paying for any repairs or maintenance on their share of the property. These costs can add up and should be factored into the buyer's budget when considering shared ownership. 

Housing association authority 

Housing associations are responsible for maintaining the overall structure of the building and shared areas, including repairs to the exterior of the property. This can include issues like the roof, communal hallways and shared gardens. It leaves little control to the buyer that needs to accept the housing association decisions and the cost that come with them.

Restrictions on selling

Shared ownership properties come with certain restrictions, including restrictions on selling the property. Buyers will usually need to get permission from the housing association or developer before selling their share, and they may also be required to offer their share to the housing association or developer first. This can make it more difficult for buyers to sell their share in the future. It can also limit the buyer's flexibility and control over their property, which can be a disadvantage for some.

Rent payments

While the rent on the remaining share is usually set at a below-market rate, it is still an additional cost that buyers will need to consider. This can make it more difficult for buyers to save for a larger share or to increase their ownership over time. It's important to remember that while the rent is reduced, it is still a regular outgoing that needs to be budgeted for.

Conclusion

So, is shared ownership a good idea? The answer to this question will depend on individual circumstances and preferences. Shared ownership can be a great option for those who cannot afford to buy a property outright and are looking for a more affordable way to get onto the property ladder. It also offers the potential for profit and the opportunity to increase ownership over time.

However, shared ownership does come with its drawbacks, including limited choice of properties, additional costs, and restrictions on selling. Buyers will also need to consider the long-term financial implications of paying rent on the remaining share. It's important to weigh these factors against the benefits to determine if shared ownership is the right choice.

Thinking of buying a shared ownership property?

If you are thinking of buying a shared ownership property, you will need the advice of a conveyancing solicitor. 

When you buy any property the process must go smoothly and adhere to legalities. We at Homeward Legal can ensure all of that. We can help you in buying a shared ownership property as we have extensive experience in the property market.

Contact Homeward Legal now at . You can also get a quick quote using our easy-to-use conveyancing quote generator.