Shared ownership can be a great way of getting a foot-hold on the property ladder; it can also help movers achieve the bigger space they desire - something to bear in mind now more and more of us are working from home. However, as with everything, there can be pitfalls and being aware of them can save you both money and time.
Both mortgage arrangement and valuation fees will be payable if you intend to buy or increase your share of the property. Same applies if you are looking to change lenders to achieve a better interest rate or mortgage package.
You also need to be aware that if you swap lenders, you could endure a penalty - in the form of an early mortgage termination with your existing lender.
You will need to pay legal fees since your lease contract will need to be altered by a legal expert in tune with the additional amount of the home you own
Finally, whether your ‘staircasing,’ swapping lenders or both, you will need to pay for an ‘official valuation;’ this will be necessary before the process can begin.
Limits on Desired Property Alterations
Regardless of how much of the property you own, you will most likely be restricted by the extent of alterations that you can do; even decorating can be limited.
Property Sale Complications
The Housing Association usually has first refusal on whether to purchase your property – should you wish to move. This is still the case even if you have ‘stair-cased’ and own a full 100% of your home. This can cause sale delays since the Housing Association will be looking for a buyer requiring the same help and support – with shared ownership – as you initially did. Usually after a set amount of time, you can appoint your own selling agent.
Building Repair and Maintenance Changes
If the Housing Association own the building, in which you live, they may provide support for repairs and maintenance. However, where the building is owned by an independent company, you will almost certainly have to pay towards specific ongoing repairs such as roof maintenance and repairs to communal areas; this is especially relevant to flats within blocks.
Falling into Negative Equity
In many situations, shared ownership schemes are based on brand new properties. This being the case, it’s possible that - as with most new homes, the original price was a little 'over inflated' since most brand - new homes carry a price premium! With this in mind ‘staircasing’ might see you tip the balance into negative equity where you owe more than the property is actually worth.
When you are initially considering embarking on a shared ownership scheme, you need to have an idea of your longer- term objectives. For example, is this home a ‘stepping - stone’ or is it more of a ‘forever residence;’ this being the case, little if any equity might not be quite such an important factor early on.