What is a shared ownership mortgage?

If you’re a first-time buyer and you’re struggling to afford all of the costs associated with buying your first home, then a shared ownership mortgage could be the answer. In this post, we’ll explain exactly what a shared ownership mortgage is and give you all the advantages and disadvantages so you can decide if it’s the right option for you.

Shared ownership mortgages: The basics

So, what exactly is a shared ownership mortgage? Also known as Part buy/Part rent, this is a government run scheme which helps people to buy a share of a housing association or council owned property. They then own a percentage of the property and pay rent on the rest (usually at a reduced rate).

This can be a great way to cut the cost of buying your first home because you’ll need a smaller mortgage – and also of course, a smaller deposit.

Am I eligible for a shared ownership mortgage?

There are some specific requirements in order to qualify for this type of mortgage:

• You must 18 years old or over.
• Your annual income must be less than £80,000 (or £90,000 if you live in London).
• You must be a first-time buyer OR in the process of selling your current property if you already own one.
• You must be able to show that you can’t afford to buy a home that meets your needs on the open market.
• You must be able to prove that you’re up to date with any existing mortgage or rent payments.
• You’ll need to show that you can afford the regular costs of buying a home.

Is a shared ownership mortgage right for me?

To help you decide, here are a few of the pros and cons for you to consider:

What are the alternatives to a shared ownership mortgage?

If you’re not sure if this is the right option for you then perhaps one of the government schemes below might be a better fit?

Help to buy

The government will provide an interest free loan of 20% (or 40% if you’re in London) of your property value and you can borrow the rest through a commercial lender.

Learn more about the Help to Buy scheme here

Right to buy

If you’re a tenant of a housing association or council owned property, then this scheme gives you the right to buy your home at a discounted price.

Learn more about the Right to Buy scheme here

Older people’s shared ownership

This scheme is similar to the shared ownership scheme but is aimed at people who are 55 or over. It allows you to buy a share of between 25-75% of your home.

Learn more about the Older people’s shared ownership scheme here

What do I need to know before I apply for a shared ownership mortgage?

If you think that a shared ownership mortgage might be right for you then there are a few things to consider before you take the plunge.

How much deposit should I save?

Most lenders will ask for 5-10% of the value of the share of property you’re buying. For example, if the value of your share is £100,000, you should aim to save around £10,000, which would be a 10% deposit.

Check your credit history

When you apply for a mortgage the lender will conduct a credit search so it’s a good idea to look at your credit report beforehand so you can check for any issues that might cause you problems during your application.

Speak to your housing association or council

It’s a good idea to get in touch to double check that the scheme is available in your area and whether your housing association or council have any other criteria that you need to meet in order to qualify.

Review your finances

Your mortgage isn’t the only cost associated with buying a home so it’s really helpful to properly review your financial situation so you have a good idea of exactly what you can afford. Take a look at all the guaranteed money coming into your household, such as any income or benefits. Then go through your bank statements and list out all of your monthly expenses, such as your gas and electric, groceries and hobbies.

This also gives you a good opportunity to see if there are any areas where you could save money by cancelling un-used subscriptions or switching to lower cost insurance or utility companies.

Speak to a mortgage broker

As with any type of mortgage, it can be tough to know which option is right for you. There may also be options that are only available via a broker so it’s a good idea to speak to an expert first.

Here at BB Mortgages, we offer free consultations where we’ll chat to you about your specific circumstances and help you to find the mortgage option that best suits your needs.

Here at BB Mortgages, we offer free consultations with our expert advisers, so don’t keep struggling alone and let us help!

James Carpenter,

Director,

BB Mortgages