Co-ownership: what is it?

Co-ownership is when you buy a share of a property and rent the rest. It may be an option if your income or savings means you’re struggling to get a mortgage.

  • How does it work?

    How does it work?

    In Northern Ireland, there's a way of getting on the property ladder that's a bit different to the usual home buying methods. It's called Co-Ownership and it's designed to give you a 'leg-up', even if it means you buying a percentage of the property to begin with, rather than buying the entire property all at once. In short, by buying a share of it, you'll co-own it.

    We'll explain more as you read on, but first thing's first - if you're interested you'll need to contact Co-Ownership. They are a registered housing association and an industrial & provident society, regulated and funded by the Department for Communities. You'll need to get in touch with them in the first instance, choose an appropriate property, get the sale agreed and then put in an application to purchase that share. If your application with them is successful, you'll then need to apply for a mortgage to pay for it. You'll also have to pay rent to Co-Ownership in exchange for the share that they still own.

  • How does it benefit me?

    How does it benefit me?

    First, you only need to secure a mortgage for the share that you actually buy. So if you want to co-own a house valued at £100,000 and you’ve agreed to buy a 50% share of that house, then you'll only need a £50,000 mortgage. The other 50% of the property will be co-owned by Co-Ownership.

    Second, some mortgage providers may not require you to put down a deposit, as Co-Ownership’s share often acts as one. In this example, the bank is potentially lending you 50% of what the property is worth, so the loan to value (LTV) is just 50% of the property's value. LTV means the percentage of the mortgage loan, compared with the full valuation of the property.

    Third, the rent that we mentioned earlier is set relatively low, so even though you will be paying both the mortgage and rent together, your total costs every month could well be lower than if you just had a mortgage for 100% of the property. Of course, there are no guarantees that that will always be the case, but as a general rule of thumb, and in many instances, it can often work out more cost effective to do it this way. As usual, it depends on the maths and on your personal circumstances at the time.

  • What if I want to buy the entire property at a later date?

    What if I want to buy the entire property at a later date?

    Then you can, and you can do this with relative ease. It's called ‘staircasing.’

    You can increase your ownership share of the property in 5% increments and whenever you want to, taking you potentially from a minimum of 50% ownership to a maximum of 100% ownership, which is called 'full staircasing'.

    You can do this by either saving the rest of the funds yourself (until you have enough to buy the rest of the property outright), or by applying for the additional lending by getting in touch with your current mortgage provider.

    Remember, if you wish to increase your borrowing to take advantage of staircasing, regardless as to how much extra you want to borrow, you will need to satisfy your bank (or current mortgage lender) that you can actually afford the new, higher repayments. They'll go through another mortgage application with you and establish (all over again!) your ability to repay the new, higher amount. It's likely that they'll also want to organise a further valuation on the property, just to make sure there's sufficient equity available, which is a fair point seeing as they're the ones taking the risk and lending you the funds in the first instance. On a positive note, though, the more of the property you own, the less rent you will pay back to Co-Ownership.

  • What else do I need to know?

    What else do I need to know?

    Until you progress to full staircasing (as in you own 100%), the property isn't yours entirely, so you won’t get the full proceeds if you have/choose to sell it. As well as that, when/if you do buy any additional percentage of the property, you'll also pay the going market rates that apply at that time. So if the property market has risen substantially, you could pay more for the final 50% (or however much you are buying) of the property, than you did when you bought the original 50%.

    There is also eligibility criteria to consider, meaning that not everyone can become a Co-owner. 

    But for lots of people, Co-Ownership can be an excellent route into the property market. It's worth looking in to.

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