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What is a shared ownership mortgage?

The shared ownership scheme is a government scheme that makes moving to a new home more affordable for prospective homebuyers. The scheme enables a buyer to purchase a property to live in without having full ownership of the property. Instead, the buyer purchases between 10% and 75% of the property value either with cash or a mortgage and then they pay rent on the remaining share. Shared ownership is for those who would normally be unable to borrow enough mortgage to buy a property either because their income is too low or because they are unable to save sufficient deposit. With shared ownership, they do not need as big a deposit or as large a mortgage thus helping them join the property ladder sooner than they would normally be able to.

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How do shared ownership mortgages work?

Shared ownership mortgages enable prospective buyers to borrow the funds they need to purchase a share of the property when they cannot do so outright. You own the property jointly with either the local housing association, council or developer (depending on the scheme). You can buy between 10-75% of the property value and then you pay rent to the council on the remainder. The rental payment usually equates to between 2% and 3% of the value of the unowned share e.g if the property was worth £250,000 and you own £100,000, you pay 3% of the £150,000 (£4,500pa). You then pay this rent monthly to the housing association whilst also making your mortgage repayments to the lender.

In time, it’s possible to increase your share by buying more equity in the property. It’s known as ‘staircasing’ and allows you to buy more equity in 1% increments. As you increase your share, your rent will reduce accordingly and you can put the extra towards buying more equity.

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Who is eligible for a shared ownership mortgage?

Shared ownership is available to those who:

  • Have a household income of £80,000 or less
  • Reside in the UK
  • Have a good credit history
  • Predominantly for first time buyers but it may be possible to qualify if you are not
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How to get a shared ownership mortgage

As with other standard mortgage applications, the lender will review your situation to determine whether to lend to you.

Apply for the shared ownership scheme

You’ll first need to apply for the shared ownership scheme to make sure you are eligible. Our team can help with this and take you through the process. You’ll also be able to find out what qualifying properties are available in your area. Shared ownership is not available on all properties and the majority of properties it’s available on are new builds.

Find a shared ownership mortgage

Once you are aware of the properties available, we’ll help you calculate how much you can borrow. Next, our friendly team will recommend a shared ownership lender who is the right fit for your circumstances.

Get your mortgage pre-approved and begin your home search

Next you’ll narrow down your choice of properties and put in an offer on your chosen one. Once accepted we’ll continue to work on your mortgage application to help you secure the borrowing that you need.

 

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The main advantages of shared ownership mortgages

Shared ownership mortgages make the dream of owning your own home a reality. They allow you to buy a property a share at a time as your career and income progress. The lower costs of shared ownership mortgages allow you to get on the housing ladder in a more affordable way. If the time comes when you want to sell and the property has increased in value, you’ll also benefit from this.

Things to consider when applying for a shared ownership mortgage

At the same time, there are also some things to consider before applying for a shared ownership mortgage:

  • Not all lenders offer shared ownership mortgages. – Rates may be less competitive or you may find it harder to secure a mortgage compared to other options.
  • The property you buy will be a leasehold property. – It’s possible you’ll have other service and maintenance charges to pay the leaseholder.
  • You may need to obtain permission from the joint owner if you wish to make any changes to the property
  • Some shared ownership schemes have limitations on who you can sell the property to (e.g. local buyers only).
  • Shared ownership is not available on all properties
  • The majority of qualifying properties are new builds which can be more expensive
  • There are a limited number of shared ownership properties available at any one time

Alternative options to a shared ownership mortgage

Shared ownership isn’t the only affordable option for homebuyers wanting to get on the housing ladder. It’s important to consider other options which might be a better fit for your individual circumstances. Alternatives include a joint borrower sole proprietor mortgage and rent to buy mortgage.

Joint Borrower Sole Proprietor Mortgage

A joint borrower sole proprietor mortgage allows homebuyers to buy a property of their choice with the help of family or close friends. The lender uses the income of the ‘helpers’ in their calculations, increasing the loan available to you. If you have family and close friends who want to help you get on the housing ladder and are willing to contribute, this could be an option. It is important to note, however, that the income ‘boosters’ will not own the property or have any ownership rights and the buyer is the sole owner. At the same time, if the buyer is unable to make the payments and these are not met by the ‘boosters’ the credit record of all parties will be affected.

Rent to Buy

Rent to Buy allows buyers to rent a property of their choice for a number of years and then buy the property at the end of the lease. It works in one of two ways:

  1. The buyer pays subsidised rent for a set term, puts away the money they’ve saved from the subsidy and then at the end of the agreed term are offered the option to buy the property.
  2. The buyer pays rent at normal rates for a set term and then at the end of this they receive some of their rent back to be used as a contribution towards the purchase of the property.

Both schemes are affordable alternatives to shared ownership mortgages and may be worth considering. To discover which is the best fit for your situation, speak to our friendly team for no obligation advice.

Why choose Simple Fast Mortgage to secure your shared ownership mortgage?

Buying a property is one of the biggest financial decisions you can make. There are a lot of steps in the process so it can be confusing for those with limited mortgage experience. By working with our team of friendly mortgage experts we can help make the process much more straightforward. Our connections in the mortgage market give us wide access to specialist shared ownership mortgage providers offering competitive deals. Our extensive knowledge of the market also gives us an understanding of which lender is the right fit for you based on your long term plans. We’ll also offer you jargon-free, no-obligation advice to help you make the right choices to achieve your home ownership goals. Contact our friendly team to start your application today.

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