Published on 12, July, 2020
Hey I know I keep going on about moving I’m just finding it hard and I don’t think my folks get it so I can’t really talk to them much. looking at renting isn’t really going great I’m just struggling with the whole concept. However it struck me today that rather then saving for a home and renting why don’t I do shared ownership. But then I don’t really know what that is where it would lead me and what happens so could someone please explain to me what shared ownership is? In simple terms because Google is confusing me and what the pros and cons are
Shared ownership is where you own a percentage of the house which is paid by mortgage and also pay rent on the other part that you don’t own. You will still need to save a deposit and pay legal fees but the deposit will be smaller than buying the whole house. You will also have the option to buy a larger share of the house in the future and pay less rent. I have heard that they can be very difficult to sell though and a flat will also be subject to extra maintenance fees. My brother is using an inheritance to buy a large share of a property outright then pay cheap rent, that’s probably the best way to do it
Is it better than just renting? I can’t afford a mortgage outright yet and I guess renting in the long run would end up being more expensive?
I think that would depend on your circumstances, you would probably still need at least 5-10k in savings to cover the mortgage deposit and fees for a shared ownership property which is completely out of reach for a lot of people. It’s also a good idea to have extra savings on top of the mortgage deposit & legal fees to cover emergency repairs etc. The exact prices will depend on the property value, the percentage you are buying and how much deposit you are paying but when you add the shared ownership mortgage, rent and service charge together it may not be much less than renting a similar property. There are some calculators online if you know the numbers you’re working with, I think ShareToBuy has a good one
The more deposit you can afford to put down the smaller the mortgage payments will be on a small share of a property. Or if you use a larger deposit to buy a bigger share then the rent payment will be less. Have you considered talking to a mortgage advisor? They take your bank statements and payslips and put all the numbers into their software and it tells them what you can afford to do. Might give you a clearer answer because they’ll have all the specific details about your finances