What Is Co-ownership & Why Should You Consider It To Buy Your First Home

Kith & Kin Financial Wellbeing

Kith & Kin Financial Wellbeing Social Enterprise in Belfast is the first social enterprise in the UK to provide access to financial information and face-to-face advice to people in the workplace and the community.

Buying a house is one of the most exciting times of any adult's life but it can also be a stressful time as you try to understand everything from mortgages to surveying.

Increasingly, prospective home buyers can face a lot of conflicting opinions and advice from friends and family, which can add to the overwhelming process of purchasing their first home.

Founded by experienced Financial Advisor Sean Bruen, Sean recognised the gap in people’s knowledge of where the best place to go for financial information and guidance is.

One area the organisation can help people in is navigating the world of co-ownership, a solution often considered by first time buyers.

Here’s Kith & Kin’s advice if you are considering co-ownership:

What is a co-ownership mortgage?

Co-ownership is a not for profit organisation open to anyone which enables those on low salaries or who have no deposit to buy their first home. 

Set up in 1978, over 30,000 people in Northern Ireland have benefitted from the shared ownership plan which involves buying the share you can afford and then leaving co-ownership to cover the rest. 

Sean explained: “There are no fixed limits on properties to choose from with this option as you can pick from a new build or existing property anywhere in Northern Ireland up to a maximum property price of £165,000. 

“With zero deposit required, co-ownership is an affordable way of buying a house and if your goal is to eventually own the house, you can increase your share in your home in 5% or higher blocks in a process called ‘staircasing’. 

“You will pay your mortgage on the portion that you own and then pay rent to Co-Ownership on the other part. Rent is charged at 2.5% of the value of the Co-ownership share of your home e.g. if your home is valued at £120,000 and you own 50% the annual rent is £1,500 or £125 per month.”

Who can buy through co-ownership?

“The majority of applicants for co-ownership are first-time buyers” said Sean, adding: “but it can also help people who have owned a house before. You can opt for a Co-Ownership plan if you’re an individual, with a partner or even with a friend.”

He identified the key criteria as:

• You are over 18 and live in the UK
• You do not currently own any property or land anywhere (exception for co-ownership portability cases)
• You will live in the property as your only residence and will not use the property for business purposes
• You have an adequate right to reside in Northern Ireland
• You have had no payday loans or home credit within the last twelve months
• Any Debt Relief Orders, bankruptcies or Individual Voluntary Arrangements must have been satisfactorily completed at least six years before applying
• You have no outstanding adverse credit at the time of making co-ownership application

Advantages of Co-Ownership

• It allows someone on a low salary or with no deposit to buy a home, they could not buy through any other means
• Your monthly repayments can often work out cheaper than if you had an outright mortgage. 
• The monthly payments are also generally lower than if you were to rent privately.

Disadvantages of Co-Ownership

• It can be difficult to move house in the scheme
• The house is only half owned by yourself unless you increase your share in the home.
• Not all lenders will offer mortgages for Co-Ownership, however the majority will.
• You have to pay 100% of the rent and service charge on your property, however low your share is.
• While you’re free to decorate internally, there may be restrictions on what home improvements you can do. You may have to obtain permission from the relevant housing provider before you make any structural alterations to your home.

Other important things to consider

5 year fixed vs 2 year fixed mortgage deals

According to Sean it’s important to consider what deals you are being shown.

He said: “For years, two-year mortgage deals have dominated the market and longer mortgage options such as five, eight or ten year fixed plans are not explored.

“Taking out a mortgage for a longer period of time can help homebuyers and remortgagers protect their mortgage rate especially during times of economic and political uncertainty.

“However, when comparing mortgages it’s recommended that you always look at the full cost of the deals rather than focusing solely on their initial rates or incentives.” 

For Sean and his team of financial advisors this is the type of advice they can help people with.

Why should you take out income protection?

Another issue Sean said is important for first time buyers to consider is income protection.

He said: “Surprisingly, only around 6% of people have income protection, yet it's the most claimed policy to have.

“Income protection is a long-term insurance policy that covers you financially and makes sure you get a regular income until you retire or are able to return to work. 

“Typically, it covers a maximum of around 66% of your salary if you’re unable to work.”

Kith & Kin Financial Wellbeing Social Enterprise are winners of the Natwest Top 100 Social Enterprises in the UK in 2020, their first class financial help spans across all areas such as mortgages, budget planning, pensions, credit, insurance and savings.

If you’re interested in seeing whether you should take out income protection, get in touch with Sean today who can connect you to one of their financial advisors.

Need Mortgage Advice, First Time Buyer, Co-Ownership

For more information on mortgage and insurance, contact Kith & Kin Director Sean on 07732 704808, email sean.bruen@kithandkinwellbeing.org, or visit www.kithandkinwellbeing.org.