Under this scheme, you formally buy only a share (usually 25 to 75%) in your new home, and for the remainder you pay a monthly rent to the owner of the building – a housing association or a private developer.
The rent for the remaining share is usually below market value, but it rises over time.
Over time, you can gradually buy out the remaining share to become the full owner of your home. You can buy out the entire remaining share at once, or buy out the remainder in shares several times.
All information about rent, purchase options, additional payments, operating features, etc. will be detailed in the agreement between the buyer and the owner of the building. This document must be read carefully before making a purchasing decision.
The obvious advantage of the scheme is the ability to buy your own home even with low incomes and a small deposit.
Disadvantages of the scheme
In addition to the monthly mortgage payments, you will pay rent, building maintenance costs, land tax and deductions for major repairs.
Keep in mind: Even though you own a share of the property (say 30%), you are responsible for paying all maintenance and repair costs for the building.
Prohibition on rent
In most cases, the contract prohibits the lease and sublease of such real estate.
Increase in the value of shares for redemption
The agreement will state what the minimum and maximum size of shares for redemption is, how many times you can redeem shares during your ownership, whether you can redeem 100% of housing, etc.
The value of shares upon redemption may increase as it will be calculated at a specific point in time.
If you decide to buy out an additional share, the owner will call an appraiser who will assess the current value of the property and, accordingly, the value of the share for the buyout.
In addition to the services of an appraiser, you will also pay notary fees when you change your ownership interest and possibly pay stamp duty.
The contract often includes restrictions on repairs and redevelopment. Without the consent of the owner, you will not be able to not only remodel your property, but also change the decoration of your home, including flooring, interior doors, etc. Your contract may also include restrictions on keeping pets, using the home for doing business, etc.
Home sales problems
When your home is sold, the building owner usually has the first option to buy it. And if you are allowed to sell your home on your own, keep in mind that the prospective buyer must meet the terms of the co-ownership scheme and the building owner’s requirements.
Difficulties with a mortgage
Only a small number of banks provide mortgage loans for home purchase under the joint ownership scheme. It is not easy to find a mortgage loan for home purchase under this scheme.
Buying a property in the UK is stressful, as well as spending money and time, which does not always lead to the desired result. Our experience and knowledge allow us to help members of the Russian-speaking community in buying real estate at all stages of the transaction. You can consult by phone, skype, e-mail, make an appointment at our office in London or any other place convenient for you.
Call 01304268934, 07852829016 or fill out the form at www.YourMortgageAdvisor.