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 Property Ownership Options

Joint Ownership

Joint ownership or joint equity means clubbing together or co-buying to share the deposit, joint ownership mortgage payments and house-hold bills. Joint ownership of a property can be a way onto the property ladder which may even mean leap-frogging the first rung or enabling you to live in your favoured area.

When you opt for a joint ownership house or a joint ownership property you will need a joint ownership mortgage and a joint ownership agreement. 

If you are considering joint ownership of a property, you will need mortgage advice, so speak to a mortgage advisor who specialises in joint ownership mortgages.

Joint ownership is for you if you are considering investing with someone else - either a friend, family member or someone you might meet through one of the many joint ownership schemes where you can meet like-minded people looking for other joint ownership property investors to get onto the property ladder.

What's good about joint ownership, joint equity or property co-buying?

• You share the deposit between you, so you don't have to save so much to start with
• You share the monthly mortgage payments
• You share the initial costs of buying a property (solicitor's fees, etc)
• You are investing in your future, rather than paying rent
• When you sell, if the property price has increased, you will have capital to put down on a place of your own
• You get onto the property ladder earlier rather than renting or living at home
• You can sometimes afford to shorten the term of the mortgage, thereby saving on interest
• A formal cohabitation agreement helps to avoid conflict, which may not be the case if you buy with a spouse or partner
• You share responsibility for the maintenance, repair and redecoration of the property
• You share the household bills
• You share the housework
• You can part own a property but not elect to live there - renting it out

What are the downsides of joint ownership, joint equity or property co-buying?

• You need legal documents, including wills, to protect your investment, which means additional costs alongside the usual house-purchase costs
• One or more of you may wish to sell before the others are ready to move on and you may have to make alternative arrangements (such as finding a tenant) in order to pay the mortgage
• Everyone is responsible for the mortgage, so if one person defaults, the rest of you have to cover the payments
• You will need mortgage payment protection and life assurance
• The process is quite bureaucratic and you will need records to keep track of payments, etc.

Shared Ownership

Shared ownership means owning part of a property with another party (usually a Housing Association) and paying rent to them for the part that they own but allow you to live in. They do not live in the shared ownership property with you. You may be able to increase your share as time goes by, sometimes to 100%, this is called 'staircasing'.

Since 2005 when housing in the UK has become a real issue for the government, shared ownership has become a buzzword.

The government's shared ownership schemes  are primarily but not exclusively key worker shared ownership schemes. These schemes are operated under the name 'New Build HomeBuy'.

The main advantage of shared ownership is that it can make getting onto the first rung of the property ladder affordable. Another great advantage of shared ownership properties is that they tend to be new or refurbished. In some areas, stamp duty on shared ownership property is waived.

You will need a shared ownership mortgage to buy your share and a sum of money to pay for administration costs.

Shared ownership mortgages are offered by many mortgage lenders and if you are considering taking out a shared ownership mortgage you should seek specialist, no-commitment, shared ownership mortgage advice.

You will need to contact an independent shared ownership mortgage advisor to assess your requirements and they may also put you in contact with the right HomeBuy agent. You are under no obligation when you contact a mortgage advisor.

As well as taking mortage advice you could contact your local homebuy agent to find out if you might be entitled to a shared ownership property - keep your options open at this stage. 
 
When people talk of 'do it yourself shared ownership' they usually mean buying property with another investor, taking out a shared ownership mortgage on the part you own and paying rent to the other private property investor for the remainder.

Most of the schemes on offer are government-sponsored and available only to key workers and others in priority need, but there is now at least one private scheme available, whereby a first time buyer is paired up with an investor under a shared equity scheme. Unlike the government's schemes which operate only with new or refurbished properties, this one can be used for any type of property in any area.  Again, the government schemes are almost wholly concentrated on flats and apartments rather than houses.

If you are thinking of buying a property with a friend, family member, stranger or co-investor, this is known as joint ownership, or joint equity.

Shared Equity

Shared Equity is the basis for the Government's Open Market HomeBuy Scheme. In the UK shared equity is quite a new concept.

The term 'Open Market' means you can buy a home on the open market and there is no pre-selection of shared equity housing as you can choose your shared equity property from the open market.  In other words, you can buy any property you fancy under this scheme - so long as you are eligible and you can afford it of course.

Under the Open Market HomeBuy shared equity scheme you buy 75% of a property yourself with a shared equity mortgage from a select number of lenders and the remaining 25% with the help of a 'top up' shared equity home loan from the mortgage lender and the Government.

After 5 years, a small amount of interest is payable on the ‘top-up' shared equity loans which are fully repayable when you sell the property. When you sell the shared equity property you may have to also forfeit a portion of any increase in equity.

A mortgage advisor will be able to offer mortgage advice on a shared equity mortgage and which one would be right for you.

The Government also offers a 17.5% Government Equity Loan which purchasers will be able to use in conjunction with a mortgage from any lender. The loan is interest-free on both the equity loan and open market HomeBuy 'top up' equity loans for the first five years, after which it gradually goes up from 1% to a maximum of 3%.  The sting in the tail is that the lenders, both the government and the mortgage lender - will take a share in the profits of the property when you come to sell.

With both products you can 'staircase' if you like, whereby you pay off some or all of the loan during your ownership of the property.

But - as we said earlier, you have to be eligible for one of these schemes.  You must apply for one of these loans from one or the many HomeBuy agencies around the country - there will be one in your area - and they will assess your eligibility.  In order to qualify, you would normally have to be a key worker, social housing tenant or have a priority need.

Some new house-builders sometimes offer a shared equity loan as an option but it is not very common.

The Open Market HomeBuy shared equity scheme is targeted primarily at key workers at key workers and it is very rare that anyone other than a key worker is eligible for a government shared equity scheme.

For others of you are not key workers, the closest scheme to shared equity available is the 'shared appreciation' mortgage, more details available from our mortgage advice page.