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If you’re seriously considering staying in the UK on a permanent basis then consider getting your own flat. It is much better to repay a loan than to pay someone rent every month.
For those who may not be able to afford a large payment towards purchasing a flat or a house there is a perfect solution: Shared Ownership. Under this scheme, you buy a certain percentage share of the residence; the rest is still owned by the Housing Association for which you pay rent (usually at a rate of 2-3% of the share owned by the landlord). It is possible to buy up the remainder of the shares at a later date. However this may mean a re-evaluation of the value of the property. Unfortunately not all banks provide loans for purchasing property under the Shared Ownership scheme so some research into which banks provide this service may be necessary. From my own experience I can recommend a bank called Leeds. Once you submit a loan application, bank will look into various things such as your earnings, bank accounts, credit history, your expenditure on food and bills. When your application is accepted, you will need to pay from 10% to 25% of the value of your share as deposit. As an example, if the value of the property is £160,000 and the Housing Association is selling you 30% of the property this means that the value of your share is £48,000. Depending on the bank, you will have to pay from £4,800 to £12,000 as deposit. No bank will loan you 100%.
Who Can Apply for Shared Ownership?
Under the Shared Ownership scheme priority is given to key workers in a certain area. These include such community workers as teachers, policemen, nurses. Some priority is also given to those who are currently renting from the local council and also to first-time buyers. High-earners who can afford to buy their own property don’t have much of a chance under this scheme.
How Do I Search for Property?
To be eligible under the Shared Ownership scheme you must first register on the website www.housingoptions.co.uk . Here you will also find information about available real estate. Also, construction companies that build homes available under the Shared Ownership scheme often advertise in the free papers such as Metro, London Lite and The London Paper.
Advantages and Disadvantages of the Shared Property Scheme
One major problem is the limited choice of housing available under the Shared Ownership scheme. Another is that the construction companies control the pricing and there is therefore no possibility of negotiation. There is also the problem of variable rent, which means that the amount of rent you are paying on the percentage of the property you don’t own may rise over the years, so if you are paying £300 p/m now this may rise to £450 p/m in subsequent years. Also you will not be able to make major structural changes (such as building or knocking down walls) to a property purchased under this scheme. You cannot rent or sub-let such a property.
The major advantage is of course, that even if you own 20% of your property you still own something. People who cannot even afford to think about a £250,000 mortgage will be happy that they can have their own corner and a mortgage of £50,000. This also means that in the future you will find it easier to obtain a loan because you will be able to prove that you already own some real estate.
Good Advice
It is a good idea to choose a mortgage advisor recommended by the Housing Association as he is familiar with all the details of the Shared Ownership scheme and he will deal with the paper work much faster than a regular credit counsellor. Further information regarding Shared Ownership can be found on the website www.shared-ownership.org.uk
Information researched and collated by:
Alicja Borkowska
The Polish Observer
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