SHARED OWNERSHIP MORTGAGES

Important information – Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up with repayments on your mortgage. Please note that the Financial Conduct Authority (FCA) does not regulate most buy to let mortgages.

These government schemes enable those who wish to purchase may not be able to buy the whole property in one go. Prospective home buyers who are on low incomes relative to the full market value of the property are able to buy a share of between 25% and 75%, whilst paying rent on the remaining portion you do not own. Generally to be eligible for a shared ownership scheme, you will need to be a first time buyer (FTB) or a previous home owner who can now no longer afford to buy a similar property in the area. You will also need to have a household income of below £60,000 per year gross.

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Key features

  • Able to purchase a share of between 25% and 75% of the value of the property.
  • Rent is generally payable on the portion of the property you do not own. Some schemes offered by housing associations do not charge rent, meaning buying a property could be more affordable.
  • A mortgage is obtained only on the portion you are buying, meaning you need to borrow much less than if buying the whole property.
  • Typically accessible by first time buyers (FTBs) or those who have previously owned a property but cannot afford to buy today. Household income must be below £80,000 per year or £90,000 if living in London.
These mortgage products are suitable for aspiring homeowners looking to purchase a portion of a property, for reasons which include:

  • Wanting to get onto the housing ladder, but unable to afford to buy to total property from the outset;
  • Taking advantage of the local authority Affordable Housing schemes where no rent is payable on portions not owned;
  • Being early in your career and wishing to staircase when earnings increase over time

Reasons for use

  • Potentially allows you to get onto the property ladder if you are unable to purchase a property on the open market in the local area.
  • If saving rent with certain housing associations, you are able to build equity into a property earlier by only needing to obtain a lower deposit to be eligible. Any surplus funds could be used to help purchase additional shares at a later date.
  • You will be able to benefit from any capital gain if your share in the property rises in value.
  • Even if property prices temporarily fall, you could use this opportunity to buy additional shares at lower prices.

How a lender assesses your application

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Staircasing

Depending on the scheme offered, you may be eligible to increase you stake in the property over time. This is a process known as staircasing. The cost of buying additional shares will be based upon the market value at the time you wish to buy. To buy additional shares, an independent valuation is likely to be required, whilst also ensuring the funds are in place to pay for the extra share.

There may be a specific method of calculating the valuation using a set panel of surveyors presented by the housing association, alongside minimum shares that can be purchased, typically 10%. It is worth planning long-term how much of the property you want to purchase. You may be eligible to buy the whole property or a maximum level below 100% may be set by the scheme provider.

Mortgage calculators

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Benefits of getting a mortgage through us

Whole of market

Our panel of lenders include both high street institutions and specialist companies that can offer bespoke mortgage products specific to your circumstances.

Looking ahead

We take a long-term view to organising your mortgage, taking into account your future goals to find a solution that works both now and going forward.

Save you time

By understanding the general criteria of different lenders, we work to focus our search on products that offer the best opportunities for acceptance and are cost-effective.

Independent

As a company, we are privately owned and therefore are not tied to any insurance company. We work for you rather than someone else to find you the best deal.

Aftercare support

We know that a mortgage is a large commitment and continue to remain in contact with you to ensure your selected product remains suitable over the term of the loan.

Save you money

Some of our lenders only accept applications from advised clients, but can offer market leading rates. This can result in a considerable saving over the term of the loan.

Things to consider

Valuation costs

Undertaking an independent valuation can cost hundreds of pounds unless offered as an incentive by a mortgage lender. This cost should be factored into the cost of purchasing, along with the number of times you expect to staircase in the future. If only looking to purchase 5-10% share, this cost may be disproportionately high. However, this may be a more suitable option if only looking to staircase slowly due to affordability.

Amount of rent charged

Before agreeing to proceed, it is important to understand your rent obligations under the arrangement. Some housing associations opt not to change rent under affordable housing schemes, however where rent is charged this will be considered when assessing affordability as part of your mortgage application.

Property limitations

Since you do not own the property in its entirety, certain limitations will be imposed over how you can use the property. This includes permission needing to be obtained before changes can be made to the structure of the property, such as adding an extension or attic conversion for example. It is also common for sub-letting or letting out rooms to lodgers not to be deemed acceptable.

Reselling the property

You have the freedom to sell your share of the property at anytime, but will still be expected to pay for a valuation to be conducted for the housing association. The housing association will have ‘first refusal’ when selling, meaning in order to maintain their commitment to affordable housing may repurchase your share to offer to another eligible individual for the scheme. Under the agreement, you may only be permitted to sell your property to an eligible individual under the scheme which restricts the potential number of buyers.

Frequently asked questions

Is shared ownership the same as shared equity?

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Can I rent a room out my property?

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Are properties freehold or leasehold?

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Are there any other costs to consider?

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If you have a question, visit our FAQs section. If you cannot find what you are looking for, contact our team for more information.

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