What is the difference between renting, shared ownership and buying the property with a mortgage?

Question

If one opts for shared ownership, it is possible to be able to leave this agreement once able to buy a property fully i.e. by earning enough?

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Answer 1

Are you in the UK? Shared ownership has some upsides and downsides. Shared ownership usually allows Staircasing ( Buying more of a share of the property until you own 100%). The amount you pay depends on the assessed value of the property when you increase your ownership so you may pay more to increase your ownership than you previously paid for the same percentage share of the property.

You pay an agreed rent (Which usually includes a mechanism to allow it to increase over time) – So be aware.

Shared ownership introduces complicating factors such as sometimes including a requirement that service charges are 100% payable by you even if you only own a proportion. Some shared ownership properties have ended up responsible for large recladding bills via their service.charges which.

There can be processes around offering the property back to the other party if you want to sell or having to buy the entire property before you sell.

Shared ownership requires you to really understand what you are signing up for because you have an ongoing agreement with the other party that owns the rest of the property. You need good legal advice and to consider the variety of things that might happen.

You can often buy shared ownership with a mortgage like buying outright with a mortgage. Note as many people nare discovering Mortgage rates can go up and property values can go down leaving you owing more than the value of the property if you start with little equity.

With shared ownership you are theoretically sharing the upside and downside of any change in value. With an outright mortgage you are locking in the amount you pay for the property but are exposed more to interest rate changes and benefit / are impacted by increases / decreases in the properties value.

Renting you have use of the property in the UK this is usually for just 12 months – you have no interest in an increase or decrease in the properties value but are exposed to changes in supply/ demand for rental properties each time your lease ends and you need to renew.