Mythbuster Series: Shared Ownership is Just Renting by Another Name

There’s a common misconception that Shared Ownership is simply another form of renting. Some people believe that because you don’t own the entire property outright, it’s no different from paying rent every month. However, this couldn’t be further from the truth!

In reality, Shared Ownership offers a real path to homeownership by allowing you to build equity in your property over time, which is something you can’t achieve with renting. There are approximately 202,000 households in the UK that live in shared ownership properties. Let’s dive into how it works and why Shared Ownership is a smart way to get on the property ladder.

What is Shared Ownership Really About?

While renting only gives you the right to live in a property, with Shared Ownership, you’re buying a share of the property – usually between 10% and 75% – and paying rent on the remaining portion. The key difference here? As a shared-owner, you benefit from any increase in the property’s value. Over time, this means you’re building equity (ownership) in your home – something renting can’t offer.

How Shared Ownership Helps You Build Equity

When you own a portion of a Shared Ownership property, any appreciation in the home’s value benefits you. This means if house prices go up, so does the value of your share – translating into real gains. Plus, with staircasing, you can gradually buy more shares of your home, potentially reaching 100% ownership over time.

Even though house prices can fluctuate, which means your property’s value could also go down, owning a share means you’re still gaining an asset over time, unlike paying rent, where the money only covers your cost of living.

Shared Ownership vs. Renting: What’s the Difference?

Let’s break it down:

Advantages of Building Equity with Shared Ownership

The beauty of Shared Ownership is that it’s a long-term investment. As you buy more shares, you’re not just paying for a roof over your head; you’re increasing your financial stake in a property that could grow in value. Eventually, you can aim to buy the property outright, giving you full ownership and a valuable asset for your future. Plus, owning property opens up options for passing it on to loved ones or selling it later.

How to Increase Your Equity Over Time

The great thing about Shared Ownership is you can staircase – a process that allows you to buy more shares over time. It’s a flexible system, and you can do this whenever you’re financially ready. By doing this, you gradually reduce the rent you pay and increase your ownership.

Before diving in, it’s always a good idea to speak with a financial or mortgage advisor who can help you map out your home-buying journey and see how staircasing fits into your long-term financial plans.