Shared Ownership
Live Above Your Means!
Shared ownership is a way of you buying and living in a property that is well beyond your budget.
In Shared Ownership, you and someone else (or an organisation) buy a property together. However, you have exclusive use of that property.
When you eventually sell the property, the 'someone else' gets a share of the selling price, usually in the same proportion as the share of the original purchase.
Shared ownership schemes are often offered by government or council-backed organisations as a way of helping first-time buyers onto the housing louder.
However, you can enter into a shared ownership scheme with anyone - any parent, sibling or friend who has money to invest in the long term may be interested in such a scheme.
Main Advantages
This can be a "win-win" for both parties because:
- you buy a property that you otherwise couldn't afford, and live in it;
also, you can gain from any increase in the equity value of the property - the other person, or organisation, benefits from both rental income and any increase in equity in their share of the property.
Government-backed shared ownership schemes often have some form of subsidy or discount, so it can help you into housing that is otherwise unaffordable.
Case study
Jane is starting out on a new career as a nurse, working in a city centre hospital. She can't buy a property because they are all too expensive, and even the cheapest rental properties are more than she can realisitically afford. However, a housing association is building a block of flats and offering shared ownership for first time buyers.
Jane will be buying 35% of a flat, and paying a subsidised rental on the remaining 65%, ownership of which will be retained by the housing association. She will live in the flat, for all practical purposes the flat is hers, but she will have a low mortgage because she will only be buying a part of the property. However, when she eventually sells the flat, she will get 35% of the proceeds, and the housing association will get the other 65%.
Some shared ownership schemes may allow you, as your salary increases, to buy a greater share of the house (this is sometimes referred to as "staircasing").
If you have relatives (eg: parents) or friends who have some money they wish to invest, a shared ownership arrangement between you could be beneficial for both of you.
Main Disadvantages
Some housing schemes are stacked in the favour of the association. For example, if the property value goes down, then all the loss occurs in your share of the property.
If you want to make any structural alterations or improvements, then you may need the agreement of the landlord. Also, whilst you may incur the full expense of those alterations, it is likely that you have to share any improvement in value of the housing with the shared owner. This may make improvements uneconomic from your point of view.
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