A new calculator has been launched which allows prospective buyers considering shared ownership to work out the total cost of purchasing a share of their property over the full mortgage term, not just the first year.
The Shared Ownership Calculator also enables users to stress test their borrowing against future rent and interest rate rises, or service charge changes — even letting them look at individual years to see the full monthly impact.
Shared ownership allows people to part buy and part rent properties, increasing their ownership over time. It has been available since the 1980s but has been restricted with local councils dictating who should be a priority based on factors such as salary, profession or where the buyer comes from.
Created by an ex-Goldman Sachs technologist in her spare time and free to all, the new tool for shared ownership buyers also contains a staircasing calculator.
Staircasing is the process of purchasing further shares in a property, including up to outright ownership.
The government has eased restrictions on shared ownership as part of a campaign to turn generation rent into “generation buy”.
Shared ownership is now available to anyone no matter what their occupation and income caps have been raised to £90,000 in London and £80,000 elsewhere in the UK. Rules preventing people using the scheme more than once have also been abolished.
Under the new measures, a family in the North East for instance could need a deposit of £1563 to buy a 25% share in a typical shared ownership property in the region. The government estimates that this figure would be £2,000 in the South West, rising to £3438 in London.
Natasha Brown, founder of the Shared Ownership Calculator, said: “When I looked into the possibility of shared ownership myself, not only did I feel I was getting a hard sell from various housing associations but it was incredibly difficult to understand the overall cost, especially when it came to the prospect of staircasing to full ownership, which is what buying a home is all about. I also felt there were no tools available to help me stress test my ability to maintain payments when circumstances change in the future, which they invariably do.
“With certain other calculators, the ‘what ifs’ and potential risks facing borrowers seemed to be an afterthought rather than something that’s integral to the purchase process. With house prices still very high in certain areas of the country and income limits also recently increased, shared ownership is only likely to gain in popularity. Hopefully this calculator will help people to better understand the full financial impact and risks before they commit.”
You can try out the calculator here.
As part of a drive to put home ownership at the heart of its economic plan the government is investing £8 billion to build 400,000 affordable homes.
This includes £2.3 billion to build 200,000 starter homes with 20% discounts for prospective buyers under 40. It will also commit £4 billion to housing associations, local authorities and private developers to build 135,000 homes as part of the Help to Buy programme. A further £1.6 billion has been earmarked to build 100,000 affordable homes for rent.
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