Group
mortgages represent the most accessible method for most
buyers of sharing the cost of buying a property, but they are
not the only choice available.
Another
type of scheme that is growing in popularity across the UK and
is better suited to some buyers is known as shared ownership,
or shared equity.
The
value of the shared ownership market grew to £517m between 2001-2005,
a 35% increase. At present, this type of scheme is mostly run
by local councils and housing associations:
Buyer buys only a portion of the property
May pay rent on the remainder
Remainder of property is held by owner, e.g. housing association
Shared
ownership schemes are an excellent alternative for people on
a limited income who are unable to secure a large enough mortgage
to buy any property in their area. Although they are mostly
offered by housing associations and local councils, some building
societies and house builders are starting to offer these schemes
as well.
How
Does Shared Ownership Work?
Typically,
a portion between 25% and 75% will be offered for sale to the
buyer, who will secure a shared-ownership mortgage on this amount.
They may or may not, depending on the scheme, pay an amount
of rent on the portion of the property they do not purchase.
The
payment of rent is in return for the right to use the portion
of the house that has not been purchased. However, rent is not
always payable - some alternatives are:
The vendor has the right to a certain portion of future
profits from the sale of the property
No charge is made for the use of the remainder of this house
Schemes
vary widely, and are usually locally-based, but several building
societies now offer shared ownership mortgages, so it is worth
asking a broker or some high street lenders if you can't find
a suitable scheme in your area.
Benefits
Shared
ownership schemes offer a range of benefits to buyers on restricted
incomes:
Provide a chance to gradually buy a stake in a property
Often allow buyers to increase their stake over time (known
as staircasing)
Schemes
like these are playing an important role in making affordable housing
available to those on limited incomes, but it should be noted that
their availability is fairly limited, and opportunities are usually
oversubscribed, so it may take some persistence to buy a property
on this basis.
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