Today, the majority of people live in big cities on a rental basis. The rents are exorbitant, and there is a recurring increase at periodic intervals. However, purchasing own home is just unaffordable. Shared ownership emerges as a suitable solution in this scenario. Some people feel that a shared ownership is buying a house with spouse, friend, colleague, or other family members. In reality, it is just a way of purchasing a percentage of the property from a housing association or a developer. As situation permits, buyers can acquire further share until it reaches 100% of the valuation. It is a popular practice in the UK and government even runs various schemes for shared ownership.
Since property prices have been showing an upward trend from quite some time (especially, in metro cities), it becomes incredibly difficult for low-paid professionals to even think for buying a decent house. There is always a gap between their spending capacity and property prices. Hence, government has to come forward with affordable housing schemes. Since these schemes are closely monitored by government, there is a control on the price. Housing associations are non-profit agencies that provide and manage low-cost housing for those who can’t afford expensive ones. They have to be registered with Housing Corporation. Other than government owned initiatives, there are various private players as well.
A 5-step guide for buying shared ownership
Here comes an easy and comprehensive 5-step guide that tells you a systematic way of acquiring shared ownership without hassles.
- Writing an application properly: It is very important to write a proper application by consulting a local consultant. Nowadays online application forms are available on the website. You can just download and get it printed if they want in hard copy. If they accept soft copy, then fill the necessary details on the screen. They assess eligibility immediately and inform accordingly. Remember, home purchase agent has to be the first point of contact if you are interested in a shared accommodation. They have the details of all shared ownership accommodations available in the nearby locality. They keep track of your requirement and inform as soon as any relevant property is available. If any new housing colony or residential building is coming up, then also they let you know.
- Wait for the call from housing agent: They inform you as soon as there is a suitable deal for you. It is important that you are responsive and attentive to the call. They arrange a site visit where you get the chance to look at the property personally. If it is a future setup, then also you may see some model flats there. Normally shared ownership valuation depends on an independent valuation by qualified valuators. Thus, it reflects the realistic market value of it. You can apply for 25 to 75 percent of the total value as mortgage, depending on your financial strength and payment capacity.
- Arranging mortgage amount: You have to arrange mortgage amount as per your requirement. Today, most housing associations appoint Independent Financial Advisor, a consultant helping people for the correct way of mortgage processing. Sometimes housing associations only help for getting mortgage. A copy of the lease is mandatorily required for applying mortgage. Housing associations help greatly for pursuing applications.
- Make the deal final: Once the mortgage is finalized, and you receive confirmation from the financial institute, now it is the turn to move ahead with the deal. Call the solicitor to kick of the process. You need to pay for formalities like title search or local authority search performed by solicitor. As soon as you inform about the solicitor to the housing association, it delivers the contract copy to the solicitor. After going through the contract copy, the solicitor explains the ramifications to the buyer. Housing association gives the details of dues and service charges if any. You can move to a new property as soon as the exchange of contract happens.
- Upgrade the property: If at all, you wish to upgrade the share, then give an application to the housing association. They arrange property valuation that you have to pay for it. The amount spent on renovations will be reduced from the balance amount. A window of three months will be allowed for arranging mortgage. An owner can increase percentage gradually till 100% if it is available. Sometimes housing association may also buy the property back to offer other people.
Beware of a few hidden dangers of shared ownership
Shared ownership achieves very high rank, and it is termed as the future of home-ownership for people from lower and middle income strata. It is an effective means of promoting investment in property. In spite of shared ownership being admired for its incredible easiness, experts warn about a few dangers too. Apart from having limited legal protection as compared to tenants or homeowners, there are some other issues as well.
- Some experts say that a shared ownership is a form of tenancy with an option to buy it completely in the future. The landlord or housing association remains the owner till 100% buyout takes place by the party. Tenants can be evicted if there are rent errors irrespective of their share in the property.
- Sometimes housing associations lease various flats and then sub-lease them on a shared ownership basis. It is not at all in favor of those who purchase it. They can’t enforce repairs because the housing association is not responsible for the condition of the building. There may be leaks, heating problems, non-functioning windows, but shared owners have to live with it or spend additionally for repairs.
- Share owners are responsible for interior decoration, renovation and any other cost incurred to enhance the utility of the house. Housing association is responsible for the building only. There is an additional service charge for maintaining common areas like passage, lifts, staircases, etc.
In spite of a few negative points, shared ownership is a fantastic way of owning a house in highly challenging economic situation today. It fulfills the dream of those who can’t think of owning a property fully.