Shared Ownership Mortgages: A Simple Guide to Buying a First Home

Shared Ownership Mortgages: A Simple Guide to Buying a First Home

If you’re thinking of buying your first home, you might be considering shared ownership as an option. But what is it, and how does it work? Read on for everything you need to know about this popular way to purchase a first home.

If you are looking at the various ways of getting your foot onto the property ladder, when you maybe a little concerned that you may struggle to find enough savings to cover the required deposit and the associated costs in buying a property, have you considered a Shared Ownership mortgage that may tick all your boxes? Let us guide you through the process of buying a property using the Shared Ownership mortgage with its many advantages, and the cost savings up front.

What Is Shared Ownership?

Shared ownership simply refers to buying part of a property, rather than buying the whole property. Essentially, you’re ‘sharing the ownership’ with the other party, usually a housing association or company. As a part owner, you’ll buy a percentage of the property and pay rent on the rest. Over time, you’ll have the option to purchase more of the property, thus increasing your ownership. This process, known as ‘staircasing’ can enable you to purchase 100% of the property over time in 1% increments. 

What Are the Benefits of Shared Ownership?

Taking out a shared ownership mortgage and buying a shared ownership home can allow you to get on the property ladder more quickly. Instead of having to save up a deposit on the market value of the property and take out a large mortgage, you can reduce the amount you need to pay upfront and secure funding more easily. 

Although you’ll still need to pay rent on part of the property, you’ll be paying off your own mortgage at the same time and increasing the equity you have on the property. As a result, you won’t simply be paying rent to a landlord with no chance of recouping your investment. Instead, you’ll be exercising your rights as a property owner and investing in your future. 

How Do Shared Ownership Mortgages Work?

When you purchase a shared ownership property, you can typically purchase between 10-75% of the property. If a house is valued at £300,000, for example, and you choose to purchase 50% of it, you will need to pay £150,000 for the portion you’re purchasing and rent on the remainder.

Of course, you don’t need to pay this £150,000 upfront. With a shared ownership mortgage, you can access funding for the portion of the property you want to buy and make monthly repayments to your lender. As you’ll be taking out a much smaller mortgage on a shared ownership property, you’ll find it easier to secure a mortgage, even if you have bad credit. 

If I have a bad credit profile can I still get a Shared Ownership mortgage?

The very simple answer is having a Bad/ Poor Credit profile does not mean that you will not qualify for a mortgage. As Independent Mortgage advisers, we have access to the whole of the market and have many years’ experience in placing mortgages for clients who may not have a perfect credit profile. We can say to you with confidence, that if anyone can help you, WE CAN.

The property market is growing very fast as we come out of the doom and gloom of the global pandemic, and we are seeing new lenders come into the Shared Ownership market who are prepared to take a view with regards to a less than perfect credit profile, and we keep close watch on this changing market, in order that we can help you


Do You Need to Pay a Deposit on a Shared Ownership Property?

Buyers do generally need to pay a deposit on a shared ownership property but, again, the amount you’ll need to pay will be far less than if you try to buy a property in the standard way. Usually, you’ll need to pay a minimum deposit that equates to 5% of the share value. 

Using the same example as above, a 5% deposit on a property with a market value of £300,000 would be £15,000 with a standard mortgage. If you purchase 50% of the property with shared ownership mortgages, however, you only need to pay a 5% deposit on the share value (£150,000), which reduces your minimum deposit to just £7,500. 

As you can see, choosing to apply for a shared ownership mortgage can accelerate your bid to get on the property ladder and make it easier to own your own home. If you want to find out how much of a deposit you’ll need to purchase a property or what your repayments would be, it’s well worth putting your details into a shared ownership mortgage calculator. You might be surprised at just how quickly you can begin looking for your new home!

Are All Shared Ownership Mortgages the Same?

No. Mortgage lenders set their own terms, so there is some variation between what deals you can get when you’re looking for shared ownership mortgages. Due to this, it’s important to undertake a shared ownership mortgage comparison and seek expert advice. 

Independent mortgage brokers, like A Mortgage 4 You, have in-depth knowledge of the market and can identify which shared ownership mortgages are best suited to your financial circumstances. Additionally, an independent advisor has extensive knowledge of the current mortgage industry and can determine which interest rates and fees are most competitive at the time you’re planning to buy. 

Can You Sell a Shared Ownership Property?

Yes. If you want to sell your home before you’ve purchased 100% of it, you’ll be able to do so. Generally, the other part-owner (usually a housing association) will need to be given ‘first refusal’ on the property. If they decide not to purchase it, they have the right to find a buyer for the property, although shared owners can now take a more active role in the sales process earlier on. 

If you’ve purchased 100% of the property via shared ownership, you’ll be able to manage the sales process on your own. 

What Other Options Are There?

The shared ownership scheme is a great way to buy a property, particularly if you’re a first-time buyer or you’re unable to secure a mortgage on the market value on a property. However, if shared ownership isn’t the right option for you, there are numerous other schemes to consider. 

For example, the new Help to Buy: Equity Loan scheme enables first-time buyers to access a loan from the government for up to 20% of the property price (or 40% in London). With no interest to pay for the first five years, this type of scheme can help to minimise your expenditure and make it easier to secure a mortgage for the remainder of the property price. 

Getting Independent Mortgage Advice

With a range of schemes available, it’s easy to feel overwhelmed when you’re exploring how to buy a property. Whether you’re a first-time buyer or an existing homeowner with a poor credit rating, there are mortgages and schemes designed for you. Fortunately, our friendly advisers make finding the right mortgage simple and straightforward. To find out more or to undertake a shared ownership mortgage comparison, contact A Mortgage 4 You now on 0800 802 1003.

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