Buying home is the dream of any person. If you don’t have enough funds to purchase a new home on your own, you can consider shared ownership. Under shared ownership, you pay only the money that you have and get the proportionate ownership of a portion of that property. You will have to pay the rent for the remaining portion of the property. Generally the rent is paid to the housing association.
You can buy the share of a property ranging from 25% to 75%. Rest of the share will be owned by the housing association. You will have to pay 3% of the remaining shares’ value as the rent. Such properties are generally leasehold, that is you will have the ownership only for a fixed span of time. However, the lease period usually extends up to 99 years.
Once you give the specified amount for the fixed share of the property, you will become the title-holder of the lease. Your rights on the properties and your liabilities to the landlord will be mentioned in the lease issued by the housing association. The lease will also explain about the duties and rights of the landlord.
Both you and the landlord will have to take the responsibility of repairs. Generally, you will have to make the repair for any issues inside the house or property and the landlord will bear the charges associated with the outside issues. However, most landlords take a service charge from you to meet these expenses. These service charges are to be paid along with the monthly rentals.
Staircasing is the most interesting part of any shared ownership property. That is once you have bought a share, you can gradually buy more shares until you own all the shares of the entire property. This method of buying additional shares is called as staircasing.
For instance, if you don’t have enough money at the beginning you can buy a 40% share. Later when you have enough money you get another 50% or even 60% and own the home.
Price of shares
The price of the new share will depend upon the market value of the property. It will be different from the cost of the first share. If the property market is on a boom, you will have to pay a higher amount. On the other hand if the property market has dropped, then you will have to pay only a lesser amount. The value of the house will be calculated by the housing association. Generally they give a span of 3 months to raise funds for the shares through mortgage.
How to sell the property
You also have an option to sell off the shared ownership property. If you intend to sell your property you must inform the housing association about the same in writing. If you own limited shares, the housing association has the right to find the buyer for your property.
On the other hand if you have 100% shares, you can sell the property to anyone you like. However the housing association should be given the first chance to buy the property back. This right is called “right of first refusal”. The association enjoys this right for 21 years even after you purchase every share of the property.
If you are interested to buy a home through shared ownership, just fill up a form issued by the housing association.
Photo courtesy: James Bowe