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Shared Ownership vs Renting - what are the differences?

Published 2 months ago
Shared Ownership vs Renting - what are the differences?

Is shared ownership better than renting? For many, the answer is yes. Shared ownership gives you the best of both worlds: you get to own a bit of your home while still paying rent for the part you don't own. This means you're making a long-term investment, you've got more control over your space, and you've got financial flexibility. You're not just throwing money at a landlord every month; you're investing in your future. But for some, renting might work just as well. Here we explore the differences, pros and cons of each, so you can decide which might suit your circumstances the best.

What does shared ownership mean for me?

Financial Investment One of the best things about shared ownership is that you're actually investing in a property. Unlike renting, where your monthly payments are essentially money you'll never see again, shared ownership allows you to build equity over time. This means that your money is going towards an asset that could grow in value. Control Over Your Space Ever wanted to paint your bedroom a different colour or install some cool light fixtures but couldn't because you were renting? With shared ownership, the property partly belongs to you. This gives you much more freedom to decorate, renovate, and make the space truly your own. More complex renovations and works will require the approval of the Housing Association or Registered Provider though. Flexibility for the Future Another upside of shared ownership is the flexibility it offers. As your financial situation improves, you have the option to buy out the remaining shares of the property. This process, known as "staircasing," allows you to move towards full homeownership at your own pace.

How does renting stack up in comparison?

Renting a place isn't all bad, but it has its limitations. Here's a quick rundown of what's good and not-so-good about it. No Long-Term Commitment One of the best bits about renting is that you're not tied down. Most rental contracts are fairly short-term, so if you need to move for a job or just fancy a change, it's much easier to pack up and go. You'll also normally find a lot of homes available in areas you want to live. Less Control Over Your Space On the downside, when you rent, the place isn't really yours. Want to put up some shelves or repaint a room? You'll likely need permission from your landlord, and they can say no. Some people find these restrictions a bit frustrating. No Equity Probably the biggest downside to renting is the lack of financial investment. Unlike shared ownership, where you're building equity in a property, renting doesn't offer long-term financial benefits. Your monthly payments go straight to the landlord, and you don't get a piece of the property pie. You're also exposed to unregulated, random increases in your monthly rent; whereas with shared ownership, whilst your rent does increase, its controlled and illustrated from the start so you know what to expect.

Shared Ownership vs Renting: A Financial Comparison

When it comes to your money, making a choice between shared ownership and renting is crucial. But how do the two stack up financially? Breaking Down the Costs In shared ownership, your main expenses include mortgage repayments for the share you own and rent for the share you don't. On top of that, there might be a service charge for maintenance, communal services, and potentially ground rent. While this might sound like a lot, these costs often end up being comparable to, or even less than, the rent for a similar property in the same area. Renting, on the other hand, involves paying a fixed monthly fee that usually covers your living space and sometimes utilities. You may also be responsible for additional charges like council tax, and perhaps a deposit upfront. Long-Term Financial Implications With shared ownership, you're building equity in a property. Even if house prices don't soar, you'll likely have an asset at the end of it. Over time, you can buy more shares in your property, reducing the rent you pay and increasing your equity even further. In renting, you make no such gains. Your monthly rent goes into the landlord's pocket, and you're left with no property asset at the end of the day. In the long run, shared ownership often emerges as the smarter financial decision, allowing you to invest in your future rather than spending money on a place that will never be yours. Shared ownership provides a middle-ground option that combines the best aspects of renting and owning, and when it comes to long-term financial benefits, it generally comes out on top.

So, is shared ownership better than renting? The answer usually leans towards yes, especially if you're keen on making a long-term investment while enjoying the freedoms of home ownership. The answer will always depend on your personal circumstances though. Whilst shared ownership grants you the best of both worlds—financial flexibility and increased control over your living space, renting can be a great option for many people. For more information about shared ownership, view our FAQs.