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The Pro's and Con's of Shared Ownership Properties - First Time Buyer Secrets

maybe you're looking at shared ownership

as a way onto the property ladder there

are some pros and cons with shared

ownership mortgages and properties on

this video we're going to be looking at

those as well as the critical areas you

must be aware of coming up

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hey what's up guys my name is Alex Kirk

I'm a qualified mortgage broker on on

this channel we bring mortgage tips to

first-time buyers and business owners at

any point during this video please feel

free to check out the show notes for a

description and a recap on everything in

this video let's jump into the video so

as I mentioned shared ownership has pros

and cons let's have a look at the cons

of shared ownership first so initially

you're only going to own a percentage

typically starting at 25% ok with the

remainder you're gonna pay a rent we'll

come on to that in a little while you're

going to need to pay as well as a rent

service charge and annual ground rent

okay that's gonna be as well as

everything else your mortgage payment

and your rent you're restricted to

shared ownership properties only ok so

when you look for your properties on

Rightmove or Zoopla or on the market or

wherever you're looking at them the

shared ownership website from the

government you can only look at shared

ownership properties only shared

ownership properties they're not in

every location obviously location is a

critical condition or critical area when

you're looking for properties they you

know you're gonna want to really it's

going to be high up on your list you

want to get the location right obviously

that is another downside to shared

ownership you know you're restricted to

where they are you're restricted to the

Housing Association rules ok so when you

buy a shared ownership property it's

going through a Housing Association who

manage the property who charge the rent

the ground rent the service charges ok

now their terms and conditions are going

to stipulate what you can and can't do

it's very very important to look through

those terms and conditions

we'll be coming to that in the critical

list area okay so we've looked at the

the downside and of course there are

many positives to shared ownership it

could enable you to get onto the

property ladder where before you

wouldn't have had an option so that can

be used as a stepping stone which is

fantastic because typically buying a

lower share 25% and then paying a rent

on a property the same price if you are

buying it outright could overall lead in

a lower monthly payment meaning that

your affordability is improved as I just

briefly mentioned it can be used as a

stepping stone to your next property so

over time you know your wages or salary

may may increase if you're single at the

moment you may meet someone a partner

and therefore you know move on to the

next property and in the meantime even

though you own a small share you know in

theory you're reducing the mortgage debt

so your equity is increasing all the

time meaning you'll have a better

deposit for the next property there's a

lot of choice with mortgage lenders

there's a lot of mortgage lenders who

will do shared ownership mortgages a lot

of the high street lenders will do this

and you're also not penalised with a

mortgage rate there are some fantastic

rates equivalent of the lowest rates on

the market sometimes you can purchase

more of a percentage later on down the

line so if you own a small percentage

twenty-five percent and then later on

you're in a better position to purchase

more you could then increase your share

to 50 percent sometimes more and the

overall goal is to to own a property

outright

whether it's this one or your next one

and the term used for buying an extra

share later on down the line off of the

Housing Association is called stair

casing I'll come on to that again in the

critical list area because it's a term

you've got a check that exists very

important that you're allowed to

that shared ownership properties also

apply to new builds so in fact if you're

buying and looking at a new build for

shared ownership you can borrow up to 95

percent of the share you're looking to

borrow so if you're starting off at 25

percent share it's a new build all right

it's gonna be a lot less finding 5% of

25% than 5% of the hundred percent so

again the deposit you need to put down

is lower and that does apply to flats

and houses okay there's one or two

lenders that will lend ninety-five

percent of the share or new build

relevant of it being a house or a flap

now that doesn't apply if it's not a new

build okay you would need to put a bit

more of a deposit down the loan-to-value

restrictions will be provided by the

lender it's a critical area so do

remember to check that with your

mortgage lender so in the show notes I

am gonna hook up a critical list the

shared ownership critical list if you're

considering shared ownership properties

please check it out download it and take

it with you okay because it will allow

you to go one by one what I feel my

critical list of areas is that you need

to a check that applies to the shared

ownership properties that you're looking

at so double check with the shared

ownership or the Housing Association and

that everything we're going to go

through now coming on to in a second is

in existence if it isn't I would move on

or seriously question the Housing

Association okay so let's go into the

list so first and most obviously how

much is the rent okay

how much is the rent to rent the

remaining share from the housing

association is it fixed does it increase

double check those terms secondly how

much is the service charge okay they

will charge a service charge

and then also what's called an annual

ground rent okay for their management

services to that property they will have

a certain responsibility to the area and

you will be leasing the remainder from

the Housing Association double check so

double check how much the ground rent is

and the service charge okay so that

combined with the rent those three areas

will provide a monthly payment you have

to factor that in with your mortgage

payment and when you're considering your

affordability so at critical areas stair

casing can you buy an extra percentage

later on down the line to me that is

massively important I inform all my

clients to only buy properties where you

can staircase because the last thing you

want to do is buy a share and then for

whatever reason not be able to buy

another a larger share later on okay

because then you're restricted your

growth within the property ladder is

restricted you can't reduce your capital

that's leading to more equity okay

double check stair casing really really

important what that means is you can buy

a bigger share later on whether it's a

fifty seventy five percent or a hundred

percent that is the ideal scenario you

are allowed to buy up to a hundred

percent of the share okay

make sure the mortgage lender allows

shared ownership all right really really

important because not every product is

applicable to shared ownership it's very

important your mortgage lender

understands that it's a shared ownership

and also whether it's a traditional

property or a new-build again criteria

is different and it's not obvious on the

mortgage lender okay on their websites

and things like that they tend to have

one set of criteria and however for a

new build it can be different very

important that you speak with your bank

or your broker may

sure that's covered off okay so the last

area is documentation that you should

receive from the estate agent and the

Housing Association

you will need what's called an MOS and

Memorandum of sale from your estate

agent or whoever you're buying the

property from because the mortgage

lender will need that that will supply

them with critical information such as

confirmation of the purchase price the

share you're buying then you will also

need the shared ownership papers from

the Housing Association this will

provide the mortgage lender with a

detailed breakdown of the costs and the

terms of conditions such as your ground

rent your rent your service charges this

will all be factored into the

affordability of the mortgage it will

also show any other areas and terms and

conditions that must align with the

Mortgage Lenders criteria okay very

important you get those documents early

on following your purchase so as a recap

remember download the show notes there's

a big list of everything we've gone

through today you can download that take

that with you and you know ask any

questions to your estate agent and your

Housing Association make sure everything

is good question of the day

are you considering shared ownership

properties at the moment have you got

any questions regarding today's video

please let me know in the comments so

thank you so much for checking out

today's video I hope you find it useful

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