Purchasing a property outright in the traditional way can be very costly and out of the reach of many key workers and first-time buyers. A possible alternative is a shared ownership scheme.
Shared ownership schemes are also sometimes referred to as part buy/part rent.
Shared ownership schemes allow buyers to purchase a share or proportion of a home – usually between 25% and 75%.
In such a scheme, you would secure a mortgage on the share that you purchase, that is, if for example, you purchase a 50% share of your new home that say cost £200,000 then you would get a mortgage for only 50% of the £200,000 that is, a mortgage for £100,000. Clearly, therefore, the amount you pay is far lower than obtaining a full mortgage.
As you only need a mortgage for the share that you intend to purchase, the amount of money required for a deposit is often much lower compared to purchasing a property outright.
The builder or housing association then retains ownership of the other 50% which you can buy in sections over time as your circumstances improve. If you wish to buy the other share retained by say the builder or housing association, then that share must be purchased at market value so if the property has gone up in value since the original purchase price the cost of the share to be purchased will also increase.
During the time that the builder or housing association owns the remaining share, you continue to pay (usually) a below market value rent on the remainder together with any service charge and ground rent. The overall cost of the purchased part combined with the rented part can be far lower than the cost of purchasing the whole at the outset.
The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.
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