Shared Equity
Anytime someone is looking into shared equity, they are trying to alleviate some of the pressure financially when purchasing a new home. It allows you to borrow half the amount of the total property value. However, it's even more important to understand that you only have to pay on 50% of the mortgage. This means your monthly payment will be much lower than usual.
You'll also be able to take advantage of paying only half the deposit. Keep in mind there are times when the builder will actually pay for the full amount, but it depends on who you're working with and their stipulations.
The end result is a much less upfront cost, which will leave you with more money to put towards other areas of your home. Just keep in mind you must make no more than £60,000 in order to qualify for a shared equity loan. Shared Ownership
Even though shared ownership sounds similar to shared equity, the two are completely different. If you decide to take this route, you'll be able to purchase 25%-75% of the home upfront. This will allow you to take out a mortgage on this amount, but you will be required to pay rent on the remainder of it. However, as things become more affordable you can begin to buy shares of the unwanted portion back from the housing association until the home is 100% owned by you.
Utilising this option can give you an opportunity to eventually purchase the home outright.
However, the rent you are paying your housing association will not go towards anything. So you'll be losing out on that money every month. Sometimes it costs extra money to get what you want, and if you want a new home this may be the scenario you need. Possible Problems
While shared equity and shared ownership have their benefits, they also contain a host of issues that many future homeowners overlook. It's extremely important to understand that you should gradually increase your shares. When you are making your first purchase this way, you won't have to worry about stamp duty.
If you're unfamiliar with this term, stamp duty is a tax that the government imposes. While many areas base this tax on a property or document that is sold, the UK charges this tax against shares that are purchased after shared equity or ownership has been started. Our suggestion is to purchase your shares gradually and not all at once. If you do, the only thing you'll have to worry about is which option will work best for your family. Then just start putting everything into action.
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