Looking to find a new home and wondering whether to rent a property or step on the property ladder with shared ownership? We know that everyone’s situation is different, so we’ve put together a handy guide to help you decide whether renting or shared ownership is best based on your personal situation.
To get started, let’s take a look at what exactly shared ownership means and how it can help you find a home you love to live.
What is shared ownership?
Shared ownership is a government scheme designed to help people own their own home when they cannot purchase on the open market.
It’s an opportunity to buy the home that’s right for you without needing the large deposit or the mortgage that goes with it.
Shared ownership could be for you if:
- You are over the age of 18
- Your household income is less than £80,000
- You don’t already own a home at the time of buying your shared ownership property
What are the advantages of shared ownership?
One of the biggest decisions we see our customers make is choosing to move away from renting and buy their own home. We asked our shared owners what they found to be the biggest benefits of purchasing with shared ownership and here’s what they said:
- Lower monthly payments – Buying a shared ownership property means you will have a smaller deposit (as little as 5%) which means lower monthly payments. Read how our Sovereign shared owner Cara got on the property ladder at 25 with just a £5,000 deposit here.
- Staircase up to 100% - When you first purchase a shared ownership property you start by paying what you can afford. When you want to buy a bigger part, you can. This is called ‘staircasing’ and gives you the opportunity to own up to 100% of your home, allowing you to sell on the open market when the time comes to sell your property.
- Helping hand from start to finish – From moving in to moving on, our sales, marketing and home ownership teams are here to help you with every part of owning your home.
- Owning pets - Unlike rental properties, most pets are welcome in our shared ownership houses, but we have stricter guidance on pets in apartments. Our sales consultants will be able to confirm with you whether pets are allowed when you enquire about one of our homes.
What should I be aware of with shared ownership?
When purchasing a property, we would advise you to weigh out the pros and cons of the scheme you are looking in to. As with most things, there are points you should consider before going ahead with a sale.
Leasehold properties – The majority of shared ownership homes are leasehold – meaning that the land belongs to someone else. In this case, it will belong to both the buyer and us, the housing association. This means that although you can decorate your home as you wish, you will need to ask permission for any structural changes. The good news is, if you choose to buy more shares and staircase to 100%, you will have brought the property outright, meaning you may have the opportunity to buy the leasehold too.
Selling your home – When it’s time to move on we’ll help to sell your home, but unless you own the property outright you will be unable to sell on the open market. Not to worry though – we’ll list your property on our website for 8 weeks to help find a buyer for you. After this time, if the property is not sold you are able to advertise using an estate agent.
Monthly payments – With shared ownership you will have to pay a mortgage as well as rent and a service charge. A common misconception is that paying all of these fees will be more expensive than doing just one or the other, however this is not true. Shared ownership is all about affordable housing, meaning monthly payments are more than often less expensive than renting privately, or being on the open market.
You can find tips from real Sovereign shared owners on what it costs to own your own home and how to manage your finances with shared ownership, in our Money Diaries articles:
- A 35-year old IT Change Manager on £33k with a 2 bed shared ownership home
- A couple with a joint salary of £42k with a 2 bed shared ownership home
- A 27 year old Business Development Executive on £34k with a 1 bed shared ownership home
What are the advantages of renting?
From speaking to some of our shared owners, there are various reasons why renting is considered when purchasing a property - from testing a location and new area to moving out from the family home.
Renting can be seen as a ‘flexible’ option with less commitment than a shared ownership home. It allows you to live in a property and get a feel for the home and local area - if you like it, great! If not, you have the option to change your mind and find a new home. It is worth noting however, that some rental properties require you to pay rent for a minimum number of months before being able to look elsewhere.
For first-time buyers, some rental properties also offer furnished homes, meaning you’ll pay less for furniture and white goods. Some of our shared ownership homes also offer added extras to help with the costs of moving – speak to our sales consultants regarding the plot you’re interested in for more information.
What are the disadvantages of renting?
The majority of people switch from rental properties to shared ownership properties as they see it as a secure option and long-term financial investment. Although you can still save for a house in the meantime, renting a property can be seen as ‘dead money’ – you are paying someone else’s mortgage rather than your own. With shared ownership, you are able to step on the property ladder and officially become a homeowner.
Some people may also feel restricted in rental properties. As the landlord owns the home, there can be certain things you can and cannot do with the property – such as painting, making interior changes or owning pets. You are also reliant on the landlord to resolve any issues and fix repairs if needed. This can sometimes be a lengthy and stressful process depending on the time it takes to solve, however with a shared ownership home you are able to phone a helpline number in case of any emergencies and give you peace of mind.
Want more information on shared ownership?
As one of the UK’s top shared ownership providers, Sovereign is passionate about giving everyone the opportunity to own their own home. If you’re ready to start your search today, get in touch with us here. Alternatively, if you think renting is more for you, take a look at our corporate website to see how we can help.
Whatever you decide to choose, we wish you all the best in your new home!
FAQs
We partner with you to share the cost of buying your own home – you pay for the part you can afford and we’ll pay for the part that’s left. It’s an opportunity to buy the home that’s right for you without needing the large deposit or the mortgage that goes with it.
You buy a share in your home that’s right for you. That could be from 25% up to 75% initially. You’ll pay a reduced rent to us on the share we own and a monthly service charge.
As your finances allow, you can buy further shares in your home as and when you choose, meaning you’ll own more and pay less rent.
Typically, you’ll only need a deposit that is 5% of the value of your share, rather than of the total property value, meaning you could get moving sooner than you thought.
- As long as you are over 18
- Your household income is less than £80,000
- And you don’t already own a home at the time of buying your shared ownership property
… then Shared Ownership could be right for you!
Some properties may be bound by local connection restrictions in order to make them affordable for local customers. We'll let you know if there are any restrictions in place when you are searching for a property.
A deposit for a shared ownership home can start from just 5% of the share value you’re looking to buy. So for example:
If you’re looking to buy a home that has a 40% share value of £80,000, then your deposit could be as little as £4,000 - meaning you may be able to get on the property ladder sooner than first thought!
You can speak to our panel of financial advisors for more information around affordability.