Shared ownership enables low-income earners to get homes at reduces prices. All they have to do is pay between 25% to 75% of the price of the house. The rest of the cost of the house is catered for by a financial institution. The buyer must then pay a rent to the financial institution with which he enters a shared ownership scheme with. The percentage of the shares held by buyers are normally paid for by a mortgage and lender. This money does not come from the buyers own pockets. They buyer may increase his shares of the property by staircasing. Staircasing involves the gradual purchase of the shares that are owned by a financial institution until the time that a buyer owns 100% of the property. He may then seize to pay rent to the financial institution. All these facts about shared ownership make the scheme seem very appealing. However, there are shared ownership risks that a buyer must be prepared for before entering into the scheme.
The Staircasing process
Staircasing your way into full home ownership is not easy. A buyer has to pay some money for every share he buys. Shared ownership is for low-income earners and is mostly funded by mortgages. This implies that a buyer of a shared ownership property may not have enough money to buy the shares of a housing association. This is because this buyer has the financial obligations to the house which include payment of rent and mortgages. He may be so financial constrained that he will never be able to buy all the shares of the property. Cases have been documented of buyers staying in shared ownership for the rest of their lives rather than taking advantage of staircasing. Staircasing can only be possible if the buyer gets an increase in his incomes.
Failure to pay regular rent for unowned portion of the house
Shared ownerships are very much like rented properties. A buyer must pay rent to the housing association or financial institution with which he enters into tenancy with. The rent is usually 3% of the shares held by a housing association. A buyer must also make a monthly instalment of mortgages If he bought the house through a mortgage. These expenditures are made on a regular basis. A buyer who fails to make rent payments may lose his property in the long run. Mortgage lenders chip-in to rescue buyers with mortgage arrears. Even so, the buyer must repay the lender the amount of money that was used to foot his rent arrears.
Maintenance costs of shared ownerships are divided between a buyer and his financial institution. This is one of the ways that shared ownerships is similar to assured tenancy schemes. The proportion of the cost of maintenance can rise steeply if major repairs are to be undertaken. Buyers who have flats owned by freeholders rather than housing associations are even at a greater risk of paying more for maintenance. This is because they are viewed as tenants by their freeholders and are not seen as shared ownership partners.
One must consider these shared ownership risks by any buyer that is considering entering into the scheme. Although they are not high risk, they inevitably can cause you unwanted trouble during your stay. Reviewing these risks help you make a better decision for getting the most benefit out of shared ownership houses.