My Guide To Shared Ownership Mortgages

damianyouellIn this article, we will take a closer look at the pros and cons of buying a property under shared ownership conditions, as well as trying to answer as many of the more frequent questions asked by people who are looking to own property with shared ownership. If you need any additional advice, then get in touch by calling 07912076990 or emailing.

Introduction To Shared Ownership Mortgages

The idea of shared ownership properties was first introduced a few years ago at the height of the UK property boom, a boom that saw house prices rise faster than at any time in the past few decades. Unfortunately, this meant that a lot of people on low incomes were having great difficulties with getting a mortgage that covered the cost of the property that they wanted to buy.

Due to the number of people who were struggling to get on to the property ladder, shared ownership was introduced whereby the person part rents and part buys the property. This scheme can either be run by a private house builder or via a government scheme.

The amount of the property you can buy under a shared ownership scheme varies, and starts from as low as 25% and as high as 75% of the properties current market value. This amount is the amount you will get the mortgage on, the remaining percentage of the property is what will be owned by the housing association and you can expect to pay rent at around 3% of the value of the housing associations share. All shared ownership properties are classed as leasehold, and this means that you will own the lease on them for a number of years, usually 99 years. In addition to paying the mortgage on your share of the property, and the rent on the housing associations share, you may also have to pay a service charge, and this is typically paid on a monthly basis.

How Much Deposit is Needed?

When you first decide to buy a property you will already know how important it is to pay a deposit towards the amount, so that you avoid getting a 100% mortgage. Shared ownership is no different, and it makes sense to have as much money to put towards the deposit as you can. The amount that you will have to pay as a minimum for a deposit will vary greatly from mortgage lender to mortgage lender. Typically though you are probably looking at between 10% and 20% of the value of the property, depending on whether it is a newly built house or flat.

Examples of Shared Ownership Mortgages

As an example, let us take a look at how a shared ownership mortgage would work when you buy a 25% share of a property through a housing association.

Let us say that the market value of the property is £160,000. The share owned by the housing association is 75%, which equates to £120,000. The share you hold is worth £40,000 for your 25% share. Say the deposit amount is 10%, you pay that 10% on your share, so that the total that you would need to pay as a deposit comes to, £4,000. So the amount of mortgage that you would need to apply for will be £36,000. Then you will also pay rent on the 75% that is owned by the housing association, although these rents are typically subsidised.

Shared Ownership Mortgages FAQs
  • How much should I be earning in order to be eligible? If you are thinking about going down the route of shared ownership, then you need to be earning in excess of £15,000 per annum, either on your own or joint income for a couple.
  • Who can apply? Typically,shared ownership mortgages are tailored towards those people who are buying property for the first time, those living in private rented accommodation, and those people who are on low incomes.
  • So which party has the responsibility for the upkeep and repairs to the property and any communal areas? As you are the owner/occupier, then you will have the responsibility to fix any problems in the property. The only exception to this rule is any defects that are covered by the builder’s guarantee that comes with newly built properties.
  • What will happen if I cannot meet my payments? If you cannot meet your monthly obligation for your mortgage payment then you should contact your lender as soon as possible. Just like any other mortgage, if you fail to keep up to date with the repayments your home could repossessed and sold in order to clear the outstanding amount.

Shared Ownership Lenders and Providers

There are a number of different schemes that are run by the government under the title of HomeBuy, with the most popular one being New Build Home Buy. Certain properties are only available to those people whose job classes them as key workers, and these are typically teachers and nurses and workers in the emergency services. There will be certain criteria that you will have to meet in order to be eligible, such as the level of income, residency and other issues.

Not all mortgage companies offer shared ownership mortgages, but some of those that do include such lenders as Santander, Nationwide and The Halifax.