More and more people are becoming eligible from ‘shared ownership’ mortgages, where you only own a portion of the property, with the government now raising the income cap to allow those who earn up to £80,000 to benefit.
With lenders offering to pay for up to 95% of the property, these mortgages seem like a fantastic deal, but they have come with a degree of controversy, as seen in this case study by The Guardian.
What Are They?
Shared ownerships are aimed at those who cannot afford to buy their home outright, and allow you to purchase anything from 25% to 75% of the value of the property, paying a subsidised rent on the rest.
You can buy more shares of the property if your income goes up, and this will mean that your rent payments will go down.
Most lenders will offer mortgages on shared ownership properties, meaning you can secure one for a very low deposit (although as usual, the higher deposit you place, the less interest you will pay).
Similar to normal mortgages, all the different lenders will have different rates and deals, with some offering special deals on shared ownership properties.
Why The Controversy?
Having to pay rent on the part of the property that you do not own can prove to be a bit of an issue, and many who have taken up this option have complained that rent has risen far quicker than they expected.
Owners may also be liable to pay full insurance payments and maintenance costs even though they only own a portion of the property.
While many may buy into a shared ownership property with the idea of buying more shares in it once their own situation improves, these additional costs can add up and make it very hard to do so.
Selling a shared ownership property can also prove problematic. You have to allow your housing association around eight weeks to try and sell your property before you can go and do it yourself the normal way through an estate agency.
The problem here is that the housing association may take their time trying to find a buyer, or may accept a lower price than you’d like.
So on the whole, while shared ownership can be a great help to get you onto the property ladder, it can be a bit of a minefield.
We recommend getting in touch with one of our expert advisers before making any decisions as there a wide range of options available to you that you might not even be aware of.