What is Shared Ownership?
Shared Ownership (SO) is a scheme that allows eligible buyers to secure a mortgage to help them buy a portion of a property, usually between 25% and 75%. The part of the property they don’t own will be owned by a housing association or private developer.
If you buy a Shared Ownership property you’ll pay mortgage repayments for the part of the property you own, and reduced rent on the rest. You also have the opportunity to buy more of the property in gradual increments (for example, 5% at a time), a process that is known as staircasing. You can do this until you own the property outright. Although some SO properties won’t allow you to staircase 100%
Read more about Shared Ownership
How will I know if my Shared Ownership property changes in value?
Like homes bought the conventional way, the value of a Shared Ownership will fluctuate with changes in the market.
The only way you can be sure about how the value of your property has changed is to get a Shared Ownership valuation
But hold up – getting your Shared Ownership property valued
is something you should only do when you’re staircasing. This is because it can have implications
– for example, if the value of your property has gone up, the housing association or developer who owns the rest of the property might raise the rent you pay on the part of the property you don’t own.
If you’re not staircasing but you’re wondering if your property has changed in value, you can try and work it out for yourself. It’s likely that your property’s value will, at least roughly reflect changing house prices in your region of the UK. Our House Price Forecas
t can show you what’s happening in your area to give you an idea of what might have happened to your property’s value.
You can also do your own research, by looking at what similar properties have sold for in the past. Rightmove’s Sold House Price Information
is good for this and will allow you to see even more localised changes in the property market – for example, how the construction of new train stations or shopping complexes might have changed local house prices. You can look at properties on your street to get a much better idea of what might have happened to your property’s value.
What happens if my Shared Ownership property changes in value?
Changes to your property’s value and the wider housing market aren’t necessarily a problem, especially because, as a Shared Owner, you’re not impacted as heavily as someone who owns their property outright. But there are a couple of scenarios where it could be an issue.
If you’re staircasing
If you’re staircasing you’ll need to get a Shared Ownership valuation. If it comes back higher than you were expecting, you could face a number of difficulties. For example, you might find you’re unable to afford the percentage share you were planning on buying. If this happens you might need to take out a bigger mortgage or buy a smaller share.
To avoid being caught out it’s a good idea to assume that the portion of the property you want to buy is going to be more than you think. Save up a little bit more than you need, and don’t plan to borrow the maximum you can from your mortgage lender. Give yourself a financial buffer in case the valuation comes back surprisingly high.
Something else to bear in mind with staircasing is that a higher property valuation may mean the developer or housing association increases your rent for the portion of the property you don’t own. This is unavoidable – as a Shared Ownership valuation is compulsory if you want to staircase – but it’s something to bear in mind.
You can compare Shared Ownership valuation quotes with reallymoving
If you’re selling
As with any property, it’s likely that when you sell it the value won’t be what it was when you purchased it. If it’s gone up then you haven’t got a problem, but if the value has fallen you might find yourself in negative equity.
Negative equity is when the amount you get for your property is less than what you currently owe on your mortgage. If this is the case and you need to sell the property, your options are limited – owning a property, even only a percentage of one, is an investment and all investments come with an element of risk. If you’re able to, delaying the sale can be a good option. House prices might recover, or you might be able to pay off a little more of your mortgage in the meantime. But, of course, this isn’t always practical.
There are things you can do now to protect yourself from negative equity further down the line, such as:
Read more advice on protecting yourself from negative equity
It’s completely normal for house prices to fluctuate, and Shared Ownership properties are no different. The fact that you don’t own the property outright means you’re slightly more protected from it than a regular homeowner, but it also gives you a few extra things to consider, like the impact on your rent.