Looking into shared ownership
Dilpreet Bhagrath (pictured), mortgage expert at Trussle
More than half of the UK population now wait until they’re 34 before owning their first home. shared ownership is becoming increasingly popular as it can offer a route into home ownership more quickly than buying a home outright. Demand for the scheme has increased by more than 50% between 2010 and 2018, with over 13,400 shared ownership completions taking place in 2018 and more than 200,000 homes now purchased using the scheme.
With the Help to Buy scheme coming to an end and the government proposals to overhaul the shared ownership scheme, it’s likely more people will consider it to get onto the property ladder. At the moment, borrowers can only buy more shares in their shared ownership home in 10% chunks, making it difficult to increase the stake in their property. The government wants to reduce this to 1% increments, meaning borrowers can save for much smaller amounts at a time.
Homeowners will have to factor in the cost of annual ground rent, potentially uncapped service charges and payment of any repairs, which means it’s really important to budget wisely.
It might also make saving to purchase additional shares of the property challenging. If you’re considering purchasing more equity in the property, the housing association will need to complete a valuation. The additional share price will be based on this valuation, rather than the value of the property when it was initially bought.
There are also legal costs involved with the remortgage to purchase additional shares, and you should seek legal advice when it comes to your stamp duty land tax. The good thing is that there’s no time limit on staircasing, which gives you the flexibility to increase your equity in your home at a time that’s right for you.
While the additional legal costs involved with remortgaging to buy more shares in your home can feel daunting, it is possible to save money elsewhere in the process. Using a free online broker, like Trussle, provides access to over 150 specific shared ownership mortgage deals and searches for the best deal. It’s crucial that borrowers who consider remortgaging to staircase speak to a broker and look at the true cost of a mortgage deal to determine whether it’s financially beneficial for them to take this step or wait until they can purchase a larger share.