House hunters using Shared Ownership to buy a share of a property rather than renting could more than £40,000 in just two years.
Analysis by Leeds Building Society found purchasing a 25% share of a £600,000 one-bedroom flat in Islington, with a £7,500 deposit, could save borrowers as much as £41,004* over a two year period, compared with the cost of renting a similar property on the open rental market (£3,900pcm) just a short walk away.
| Shared Ownership (25% share) | Rental costs | |
| Deposit | £7,500 | £4,500 (refundable) |
| Mortgage | £736 per month | £0 |
| Rent | £1,031 per month | £3,900 per month |
| Service charge | £112 per month | £0 |
| Total | £1,879 per month | £3,900 per month |
| 2yr total | £52,596 | £93,600 |
As well as a potentially substantial saving on housing costs over two years, Shared Ownership buyers could also see the value of the 25% share in their home increase if London property prices rise.
They also have the option to increase the share of the property they own over time – known as staircasing – so could invest the money saved to buy a greater share of their home.
Matt Bartle, Director of Products at Leeds Building Society said, “Shared Ownership celebrates its 40th anniversary this year and remains a cornerstone of affordable housing in the UK. The scheme has enabled thousands of people to step onto the property ladder and remains a viable option, particularly for first time buyers.
“Time and again, the challenge of saving up for a deposit is named as the biggest obstacle facing anyone wanting to buy their first home. However, our 95% borrower share mortgages require a deposit of 5% of the share borrowers are purchasing, rather than of the entire value of the property, significantly reducing the size of deposit required.
“Recent changes to the scheme have made it more accessible than ever, with the only key restriction that borrowers must have a household income of less than £80k (£90k in London). A consultation on changes to Shared Ownership, including measures to make staircasing easier for buyers, has also recently been completed.
“For many, Shared Ownership makes financial sense as it immediately reduces the size of a deposit, purchasers own a share of their home and can build up equity if they wish, while the monthly cost can be cheaper than an equivalent privately rented home.”
Leeds Building Society offers Shared Ownership mortgages as part of its wider affordable housing products. Highlights of the Shared Ownership range includes:
- 19% two year Shared Ownership mortgage with 95% borrower share up to 75% LTV with a £1,499 fee
- 59% two year Shared Ownership mortgage with 95% borrower share up to 75% LTV with a £999 fee
- 79% two year Shared Ownership mortgage with 95% borrower share up to 75% LTV with no fee
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