When buying a home on a new build development, prospective homeowners may face the choice between purchasing on the open market or through the Shared Ownership scheme. Each option has different benefits, drawbacks, and processes, making one or other more suitable depending on individual circumstances. Bevin Woby, Director at Shared Direction Conveyancing, explores the differences to help buyers make an informed decision.
What is Shared Ownership?
Shared Ownership is a Government-backed scheme for individuals who can’t afford to buy a home outright, often due to limited savings or income. The buyer purchases a share (typically between 25% and 75%; some leases allow 10%) and pays rent on the remaining share owned by a housing provider. Over time, buyers can “staircase”, gradually purchasing more shares until they own the property outright.
What is Buying on the Open Market?
Buying on the open market means purchasing a property without Government schemes. The buyer owns the entire property from the start, usually financed through savings, a mortgage or both.
Ownership and Financial Commitment
A major difference is the level of ownership. With Shared Ownership, you only own a portion of the home and pay rent on the rest. This means monthly costs include both mortgage payments and rent.
In contrast, buying on the open market means you own the entire home from day one, and your monthly payments go solely toward your mortgage.
Affordability and Financial Support
Shared Ownership lowers upfront costs. Since you buy only a share, both deposit and mortgage payments are smaller. It also often involves reduced costs and eligibility for specific Government programmes.
Buying on the open market typically requires a larger deposit and mortgage, which can be a hurdle for many first time buyers. However, schemes like Deposit Unlock and First Homes can ease the initial financial burden.
Long-Term Financial Implications
Shared Ownership can be a stepping stone to full ownership. Over time, you can increase your share and reduce rent. Once you own 100%, it becomes a standard home purchase.
However, staircasing can involve extra costs, including fees and possible Stamp Duty.
Buying on the open
market gives you full ownership from the start. Though mortgage payments may be higher, you build equity immediately. Once the mortgage is paid off, you own the home outright, with no rent or restrictions on modifying or selling it.
Resale
Selling a Shared Ownership home can be more complex. If you own a share, you may need to sell it back to the housing provider or to other eligible buyers. With an open market property, resale is handled by you or your estate agent, with fewer restrictions.
Both options have their pros and cons, and the right choice depends on your budget, goals and desired level of control over the property.
Shared Ownership offers a more affordable entry point for those unable to buy outright, while open market purchases provide full ownership and greater freedom. Carefully considering these factors will help you choose the best path to homeownership.
For further information visit sdc-legal.co.uk or for an instant quotation call 0808 273 0273
First Time Buyer is an exciting bi-monthly glossy which takes a stylish and comprehensive look at all the options available, setting them out in an entertaining and informative way, and helping potential customers navigate their way through what is often a daunting and complex process. We dispel the myths, reinforce the facts and arm the reader with the tools necessary to make their homeownership dreams a reality.
