What Factors Should I Consider When Deciding What Percentage to Purchase on a Shared Ownership Property?

Shared ownership is an increasingly popular option for individuals looking to step onto the property ladder. It allows buyers to purchase a percentage of a property while paying rent on the remaining share. However, deciding what percentage to purchase requires careful consideration. In this blog, we will explore the key factors to take into account when deciding what percentage to purchase on a Shared Ownership Property. Always remember that it is vital to seek financial advice in conjunction with our advice.

Affordability:

One of the primary factors, in fact the most important one to consider is your financial situation. Assess your budget and determine how much you can comfortably afford as a deposit, rent on the share which you will not own and monthly mortgage payments. Take into account other costs such as service charges and maintenance expenses. It’s crucial to choose a percentage that aligns with your financial capabilities and not to overstretch.

Long-Term Plans:

Think about your future plans and goals. Consider how long you intend to stay in the property and whether you anticipate any significant life changes, such as starting a family or changing jobs. These factors can influence the percentage you should purchase. If you plan to stay in the property for an extended period, a higher percentage may be more suitable.

Equity and Ownership:

Evaluate how much equity you would like to build in the property over time. Purchasing a higher percentage means you will have a larger ownership stake and potentially benefit more from any increase in property value. This can be advantageous if you plan to sell the property in the future or if you want to have more control over decision-making regarding the property.

Rent and Service Charges:

Consider the rent associated with the remaining percentage of the property that you don’t own and also the service charges (remember that you will normally pay service charges for the whole 100% not just the percentage that you own). Ensure that these costs are affordable and align with your budget. It’s essential to factor in these ongoing expenses to ensure you can comfortably manage them alongside your mortgage payments. It’s also worthwhile noting that in any leasehold property there are likely to be items of large repair which crop up on a cyclical basis.  These can include redecoration of the exterior or common parts and repairs to the structure of the building. Depending on how the landlord or managing agent run the accounts will depend on whether they build up reserves for such eventualities or whether they invoice when work is required. If the latter it is worth having some money put aside to deal with such events when they happen.

Mortgage Availability:

Research mortgage options available for different percentages of shared ownership. Some lenders may have specific criteria or restrictions based on the percentage you wish to purchase. Speak to mortgage advisors to understand the mortgage products available to you and their associated terms and conditions.

Resale Potential:

Think about the potential resale value of the property. Higher ownership percentages may be more attractive to future buyers, making it easier to sell the property if needed. Consider the market demand for different ownership percentages in your area and how this may impact your ability to sell the property in the future.

Deciding what percentage to purchase on a shared ownership property requires careful consideration of various factors. Affordability, long-term plans, equity and ownership goals, rent and service charges, mortgage availability and resale potential are all crucial aspects to evaluate. By taking these factors into account, you can make an informed decision that aligns with your financial situation and future aspirations. Remember to seek professional advice from mortgage or financial advisors to ensure you make the best choice for your circumstances.

As with any investment decision, when buying a property it’s vital that you do your homework carefully. As well as fully researching the location and market that you are looking to buy in, it’s vital that you seek advice of experts, including surveyors and financial advisors. Alexander JLO, its Partners and employees cannot provide specific advice on choice of location or the market but can advise on all matters legal once you have made a decision to buy a property.

If you are looking for a first rate conveyancing service why not give one of Alexander JLO’s specialist property lawyers a call on 020 7537 7000, click on the get a quote button or email quote@london-law.co.uk for a free, no-obligation quotation? Come and see what we can do for you.

This blog was prepared by Alexander JLO’s property partner Matt Johnson on 27th February 2024 and is correct at the date of publication. Matt has many years of experience of dealing with property work and specialises in new build and shared ownership properties.  His profile on the independent Review Solicitor website and be found here